Low mass X-ray binaries exhibit ionized emission from an extended disc atmosphere that surrounds the accretion disc. However, the atmosphere’s nature and geometry is still unclear. In this work we present a spectral analysis of the extended atmosphere of EXO 0748-676 using high-resolution spectra from archival XMM-Newton observations. We model the spectrum that is obtained during the eclipses. This enables us to model the emission lines that come only from the extended atmosphere of the source, and study its physical structure and properties. The RGS spectrum reveals a series of emission lines consistent with transitions of OVIII, OVII, NeIX and NVII. We perform both Gaussian line fitting and photoionization modelling. Our results suggest that there are two photoionization gas components that are out of pressure equilibrium with respect to each other. One has an ionization parameter of log ξ ∼ 2.5 and a large opening angle, and one has log ξ ∼ 1.3. The second component possibly covers a smaller fraction of the source. From the density diagnostics of the OVII triplet using photoionization modelling, we detect a rather high density plasma of > 10¹³ cm⁻³ for the lower ionization component. This latter component also displays an inflow velocity. We propose a scenario where the high ionization component constitutes an extended upper atmosphere of the accretion disc. The lower ionization component may instead be a clumpy gas created from the impact of the accretion stream with the disc.