Aims. We investigate the star formation occurring in a region well below the Galactic plane towards the optical reflection nebula ESO 368-8 (IRAS 07383−3325). We confirm the presence of a small young stellar cluster (or aggregate of tens of YSOs) identified earlier, embedded in a molecular cloud located near the lower "edge" of the Galactic disc, and characterise the young stellar population. We report the discovery of a near-infrared nebula, and present a CO map revealing a new dense, dynamic cloud core. Methods. We used near-infrared JHK S images obtained with VLT/ISAAC, millimetre CO spectra obtained with the SEST telescope, and optical V-band images from the YALO telescope.Results. This star formation region displays an optical reflection nebula (ESO 368-8) and a near-infrared nebula located about 46 (1.1 pc) from each other. The two nebulae are likely to be coeval and to represent two manifestations of the same single star formation episode with about 1 Myr age. The near-IR nebula reveals an embedded, optically and near-IR invisible source whose light scatters off a cavity carved by previous stellar jets or molecular outflows and into our line-of-sight. The molecular cloud is fully covered by our CO(J = 1−0) maps and, traced by this line, extends over a region of ∼7.8 × 7.8 pc 2 , exhibiting an angular size ∼5.4 × 5.4 and shape (close to circular) similar to spherical (or slightly cometary) globules. Towards the direction of the near-IR nebula, the molecular cloud contains a dense core where the molecular gas exhibits large line widths indicative of a very dynamical state, with stirred gas and supersonic motions. Our estimates of the mass of the molecular gas in this region range from 600 to 1600 M . The extinction A V towards the positions of the optical reflection nebula and of the near-IR nebula was found to be A V 3−4 mag and A V 12−15 mag, respectively.