The natural habitat of the flame squid includes Mandurah (32°33'S, 115°04'E) in Western Australia, north of Queensland (27°25'S, 151°43'E), and the Arafura Sea in southern New Guinea, as well as the waters of Sulawesi and the Moluccas in Indonesia and the islands of Marble and Sipadan in Malaysia.

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On October 9, 1874, a female flame squid was captured in the Arafura Sea (09 degrees 59 minutes south latitude, 139 degrees 42 minutes east longitude) by the Royal Society's Challenger Expedition, which opened the door to scientific research on the flame squid. This earliest specimen of the flame squid is currently housed at the Natural History Museum in London.