Context. Clusters of galaxies represent important laboratories for studying galaxy evolution and formation. Well established and relaxed clusters are known below z < 1.4, as well as, clusters in formation found close to radio galaxies at z > 2, but the in-between redshift range, during which clusters are expected to undergo significant changes, is almost unexplored. Aims. By studying a galaxy overdensity in redshift and angular distribution at z = 1.6, uncovered in the Galaxy Mass Assembly ultra-deep Spectroscopic Survey (GMASS), we provide insight into the evolution of cluster galaxies at high redshift. Methods. We present a study of the significance of the galaxy overdensity at z = 1.6, Cl 0332-2742, its velocity dispersion, and X-ray emission. We identify the colour bimodality of the cluster members and compare the properties of members of Cl 0332-2742 with galaxies outside the overdensity. Results. From the redshifts of the 42 overdensity members, we measure a velocity dispersion of 500 km s −1 . We conservatively estimate the overdensity in redshift space for the spike at z = 1.6 in the GMASS field to be 8.3 ± 1.5. A map of the surface density of galaxies at z = 1.6 in the GMASS field shows that its structure is irregular with several filaments and local overdensities. The differences in the physical properties of Cl 0332-2742 member and field galaxies agree with the latest hierarchical galaxy formation models: for overdensity members, the star formation rate (SFR), and specific SFR, is approximately 50% lower than for the field galaxies; overdensity galaxies are twice the age, on average, of field galaxies; and there is a higher proportion of both massive (M > 10 10.7 M ), and early-type galaxies, inside Cl 0332-2742 than in the field. Among the 42 members, seven have spectra consistent with being passively evolving, massive galaxies. These are all located within an area where the surface density of z = 1.6 galaxies is highest. In a z − J colour-magnitude diagram, the photometric data of these early-type galaxies are in close agreement with a theoretical red sequence of a galaxy cluster at redshift z = 1.6, which formed most of its stars in a short burst of star formation at z ∼ 3. Conclusions. We conclude that the redshift spike at z = 1.6 in the GMASS field represents a sheet-like structure in the cosmic web, and that the area with the highest surface density within this structure, containing already seven passively evolving galaxies, will evolve into a cluster of galaxies at a later time.