Researchers have filled in the family tree of a bizarre walking worm that lived in a tropical, underwater Canada 505 million years ago.

The first fossil of the Hallucigenia sparsa was found in a world-renowned fossil bed in Yoho National Park more than a century ago, but remained a bit of a mystery.

"It really looks like something that you would see if you were hallucinating, or if you were having a nightmare," said Omar McDadi, of Parks Canada.

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Small, at 14 millimetres, the worm-like creature found preserved in the Burgess Shale deposit in B.C.'s Rocky Mountains had a row of dorsal tentacles and paired spikes the length of its body. Its head was missing, and it was unlike anything else on record.

"It's a really strange-looking creature. It has these spikes, or spines, and for over 100 years it really baffled scientists. They weren't quite sure which way was right side up, they weren't totally sure what it ate, how it lived, or if it had any family members," McDadi said.

"A small part of that puzzle has now been solved."

In an article published Wednesday in the British-based scientific journal Proceedings of the Royal Society B, researchers from the Royal Ontario Museum, the University of Toronto and Cambridge University say they've determined the creature was part of a group of animals that once lived on the sea floor from Canada to China, Britain to Australia.

Jean-Bernard Caron, curator of invertebrate paleontology at the Royal Ontario Museum, said the team took a closer look at the creature's spine, and found it looked like a stack of ice-cream cones – a structure similar to other fossils found around the world.

"They may not be exactly the same species, but they are all probably related to the same group of worm-like creature that we call lobopods," he said. "Hallucigenia had a larger family than we anticipated and was probably much more abundant during the Cambrian period than we thought."

The creature has a modern-day relative in the velvet worm that lives in tropical forests.

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It's another piece of the puzzle in understanding evolution on Earth and the origin of animals, he said.

Hallucigenia is one of the best-known fossils from the Burgess Shale, a UNESCO World Heritage site because of its incredible fossil beds that have preserved in immaculate condition creatures that inhabited the Earth millions of years ago, when it is believed that the only life on the planet was in the ocean that covered most of its surface.

At that time, what is now Canada was near the equator.

"What's really neat about the Burgess Shale is that pretty much every single living animal on the planet today can trace some of their earliest ancestors back to the Burgess Shale, including – incredibly – humans," McDadi said.

While the soft bodies of these early Earth dwellers were not generally well-preserved, it's believed they were buried in shallow mud, in an environment largely devoid of oxygen in what would become the Rocky Mountains.

That mud transformed into shale over millennia, and was discovered in 1909 high in the Canadian Rockies.

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"It's opened up a treasure box of scientific discoveries ever since then," McDadi said, adding that the area is restricted but accessible as a guided hike through Parks Canada.

Researchers will now have a closer look at the more than 100 Hallucigenia specimens housed at the Royal Ontario Museum and the Smithsonian.

"We need to find the head," Caron said with a chuckle. "We have some clues. There are more features preserved and I think I know where it is."