We present a model of the emission object V1016 Cygni consistent with the current optical, infrared and radio observations. V1016 Cygni is 4.2 ± 1.0 kpc from the sun. It was originally an M star which ejected ∼0.017 M0 at 35 kms"1 over a period of ∼600 years producing a neutral nebula with an r"2 density distribution. This process ceased in 1961.3 ±3.0 when the nebula detached from a remnant hot core (T> 80,000K, R< 1.5 Rg). By 1964 0.1 ± 0.3 the nebula was ionized by the UV radiation from the core, producing the observed emission line spectrum. The infrared energy excess comes from two dust components of M000°K and ∼250°K, which absorb UV photons from the star. The dust is concentrated into clumps which 1) provide high density areas on their inner side, allowing strong [OHI] X4363 to remain; 2) shield the regions on their outer side permitting low excitation lines to be present; 3) explain the observed emission line structure. A stellar wind of 105 km/s helps to keep the centre of the ejected nebula hollow. We suggest V1016 Cygni is an example of a low mass planetary nebula in the formation stage.