Fossils of Teratophoneus were first found in the Kaiparowits Formation of southern Utah. Later, fossils from the same formation were discovered and identified as the genus. Argon-argon radiometric dating indicates that the Kaiparowits Formation was deposited between 76.1 and 74.0 million years ago, during the Campanian stage of the Late Cretaceous period. This date means that Teratophoneus lived in the middle of the Campanian stage of the Late Cretaceous. Three different fossils of Teratophoneus have been found. Originally, Teratophoneus was described based on the holotype UMNH VP 16690. More recently, the specimens UMNP VP 16691 and BYU 8120 have been assigned to it.
Teratophoneus was named by Thomas D. Carr, Thomas E. Williamson, Brooks B. Britt and Ken Stadtman in 2011. The type and only species was named T. curriei. The generic name is derived from the Greek teras, “monster”, and phoneus, “murderer”. The specific name honors Philip J. Currie.
Loewen et al. (2013) conducted a phylogenetic analysis and confirmed the assignment of Teratophoneus to the theropod sub-family tyrannosaurinae. Teratophoneus was closely related but more primitive than the large theropods Tarbosaurus and Tyrannosaurus, but more derived than Daspletosaurus.
The only known specimens of Teratophoneus were recovered at the Kaiparowits Formation, in southern Utah. Argon-argon radiometric dating indicates that the fossils were buried during the Campanian stage of the Late Cretaceous period. During the Late Cretaceous period, the site within the Kaiparowits Formation was located on Laramidia near its eastern shore on the Western Interior Seaway, a large inland sea that split North America into two landmasses, the other being Appalachia to the east. The plateau where dinosaurs lived was an ancient floodplain dominated by large channels and an abundance of wetland peat swamps, ponds and lakes, and was bordered by highlands. The climate was wet and humid, and supported an array of different and diverse groups of organisms. This formation contains one of the best and most continuous records of Late Cretaceous terrestrial life in the world.
Teratophoneus shared its paleoenvironment with theropods such as dromaeosaurids, the troodontid Talos sampsoni, ornithomimids like Ornithomimus velox, the tyrannosaurid Albertosaurus, armored ankylosaurids, the duckbilled hadrosaurs Parasaurolophus cyrtocristatus and Gryposaurus monumentensis, the ceratopsians Utahceratops gettyi, Nasutoceratops titusi and Kosmoceratops richardsoni and the oviraptorosaurian Hagryphus giganteus. Paleofauna present in the Kaiparowits Formation included chondrichthyans (sharks and rays), frogs, salamanders, turtles, lizards and crocodilians. A variety of early mammals were present including multituberculates, marsupials, and insectivorans.