We obtained an optical spectrum of a star we identify as the optical counterpart of the M31 Chandra source CXO J004318.8+412016, because of prominent emission lines of the Balmer series, of neutral helium, and a He II line at 4686Å. The continuum energy distribution and the spectral characteristics demonstrate the presence of a red giant of K or earlier spectral type, so we concluded that the binary is likely to be a symbiotic system. CXO J004318.8+412016 has been observed in X-rays as a luminous supersoft source (SSS) since 1979, with effective temperature exceeding 40 eV and variable Xray luminosity, oscillating between a few times 10 35 erg s −1 and a few times 10 37 erg s −1 in the space of a few weeks. The optical, infrared and ultraviolet colors of the optical object are consistent with an an accretion disk around a compact object companion, which may either be a white dwarf, or a black hole, depending on the system parameters. If the origin of the luminous supersoft X-rays is the atmosphere of a white dwarf that is burning hydrogen in shell, it is as hot and luminous as postthermonuclear flash novae, yet no major optical outburst has ever been observed, suggesting that the white dwarf is very massive (m≥ 1.2 M ) and it is accreting and burning at the high rateṁ > 10 −8 M year −1 expected for type Ia supernovae progenitors. In this case, the X-ray variability may be due to a very short recurrence time of only mildly degenerate thermonuclear flashes.