Context: There is considerable controversy surrounding the nature of M1-78, a compact nebula located beyond the Perseus arm. It was first classified as a planetary nebula and is nowadays generally considered to be a compact H II region. Aims: To investigate the nature of M1-78 further, we present a detailed spectroscopic study of M1-78 in the optical and near-infrared. Methods: We obtained long-slit, intermediate-resolution, optical spectroscopy with the ISIS spectrograph mounted on the William Herschel Telescope (WHT) at Roque de los Muchachos Observatory (La Palma, Spain). As a complement, we obtained long-slit, intermediate-resolution, near-infrared spectra using LIRIS, the near-infrared imager/spectrographer also installed at the WHT. Results: M1-78 is a high-density nebula with substantial physical differences between its two main morphological zones: a bright arc in the SW and a blob of emission in the NE. Specifically, the blob in the NE has a higher electron temperature (13 400 K) and visual extinction (about 9 mag) than the SW arc. The most important result, however, is the confirmation of a nitrogen enrichment in M1-78. This enrichment is stronger at the location of the NE blob and is correlated with a defficiency in the O abundance and a (dubious) He enrichment. Such an abundance pattern is typical of ejecta nebulae around evolved massive stars such as Wolf-Rayet and Luminous Blue Variable stars. The spatial variations in the physical conditions and chemical abundances and the presence of more than one possible ionizing source indicate, however, that M1-78 is better described as a combination of a compact H II region + ejecta. This is confirmed by the He I 2.112 mum/Brgamma line ratio, which indicates a hot (T_eff ⪆ 40 000 K) O star in the SW arc. Finally, we detect H2 emission that extends over a large (~30´´) area around the ionized nebula. Analysis of the near-infrared H2 lines indicates that the excitation mechanism is UV fluorescence.