Cystodermella cinnabarina is found fruiting in coniferous and deciduous forests, on ground among moss, grass and litter. Being a saprotrophic fungus, it decays dead organic matter. It has been recorded under pine (Pinus nigra, Pinus pinea), oak, spruce (Picea orientalis), fir (Abies cephalonica) and chestnut (Castanea sativa) in Greece and Turkey. Fruiting bodies appear solitary or in small groups, during the summer and autumn. It is widely distributed around the world on continents including Asia, Africa, Europe and North America, though in many places it is uncommon. The preliminary red data list of threatened British fungi lists Cystodermella cinnabarinum under the IUCN "Near Threatened" status.
