Infrared photometry suggests that IRAS 17516-2525 is in transition from the AGB to a young PN (Van der Veen et al. 1989a, b, Manchado et al. 1989). IR spectra (van der Veen et al. 1989b, Käufl et al. 1992) revealed that the object has an ionized core. Optical observations show a weak Hα emitting unresolved object (Käufl et al. 1992) at the coordinates (α1950 : 17h51m37.8s, δ1950 : −25° 25′ 58″) suggested by van der Veen et al. (1989a). The spectrum between 2.0 and 2.4μm shows e.g. Brγ, 2.0875μm (unidentified) or the NaI-doublet but no molecular Hydrogen (present in other compact PNs). The ratio of Pfβ to Brα (hardly affected by extinction, insensitive to electron density and temperature) has been studied in IRAS 17516-2525 and Hen1044. For Hen1044 we find this ratio to be in accordance with theoretical calculations (Hummer and Storey, 1987). For IRAS 17516-2525, however, Pfβ is approximately twice as strong. Hence presumably Hen1044 is optically thin whereas IRAS 17516-2525 is optically thick at λ ≈4–5μm. Line fluxes appear to be constant over a time scale of 4 years. If the visual extinction AV in the object is ≥ 2mag than the infrared luminosity equals the total luminosity (i.e. L = 1400L⊙ ∗ (distance/kpc)2). A main-sequence object accidentally extincted by an intervening cloud can be excluded because the observed line-width of Brα (≈ 40km/s, Van der Veen et al. 1989a) is too small as compared to that of O-stars (≈1000km/s, Käufl, 1992). Assuming an expansion-velocity of ≈ 20km/s the stellar appearance constrains dynamic age and size (age ≤ 360y ∗ distance/kpc, size ≤ 1500AU ∗ distance/kpc). A pre-main sequence object can also be excluded. The max. luminosity (LPMS ≤ 5000L⊙) then requires the object to be closer than 2 kpc where it should be resolvable. In conclusion the observational evidence strongly suggests that IRAS 17516-2525 represents the searched ‘missing link’ between AGB stars and young compact Planetary Nebulae.