Elucidating the nature of the magnetism of a high-temperature superconductor is crucial for establishing its pairing mechanism. The parent compounds of the cuprate and iron-pnictide superconductors exhibit Néel and stripe magnetic order, respectively. However, FeSe, the structurally simplest iron-based superconductor, shows nematic order (Ts = 90 K), but not magnetic order in the parent phase, and its magnetic ground state is intensely debated. Here, we report inelastic neutron-scattering experiments that reveal both stripe and Néel spin fluctuations over a wide energy range at 110 K. On entering the nematic phase, a substantial amount of spectral weight is transferred from the Néel to the stripe spin fluctuations. Moreover, the total fluctuating magnetic moment of FeSe is ~ 60% larger than that in the iron pnictide BaFe2As2. Our results suggest that FeSe is a novel S = 1 nematic quantum-disordered paramagnet interpolating between the Néel and stripe magnetic instabilities. ; Comment: Supplementary information included; accepted by Nature Communications