The occurrence of new FU Orionis-like objects is fundamental to understand the outburst mechanism in young stars and their role in star formation and disk evolution. Our work is aimed at investigating the properties of the recent outburst of V1647 Ori. Using optical and mid infrared long slit spectroscopy we monitored V1647 Ori in outburst between February 2004 and January 2006. The optical spectrum is characterized by Halpha and Hbeta in P-Cygni profile and by many weak FeI and FeII emission lines. Short timescale variability was measured in the continuum and line emission. On January 2006 we detected for the first time forbidden emission lines ([OI], [SII] and [FeII]). These lines are likely produced by an Herbig-Haro object driven by V1647 Ori. The mid infrared the spectrum of V1647 Ori is flat and featureless at all epochs. The SED changed drastically: the source was much redder in the early outburst than in the final phase. The magnitude rise and the SED of V1647 Ori resembles that of a FUor while the duration and recurrence of the outburst resemble that of a EXor. The optical spectrum is clearly distinct from either the absorption line spectrum of a FUor or the T Tauri-like spectrum of an EXor. Our data are consistent with a disk instability event which led to an increase of the mass accretion rate. The data also suggest the presence of a circumstellar envelope around the star+disk system. The peculiar N band spectrum might be explained by dust sublimation in the outer layers of the disk. The presence of the envelope and the outburst statistics suggest that these instability events occur only in a specific stage of a Class I source (e.g. in the transition phase to an optically visible star surrounded by a protoplanetary disk). We discuss the outburst mechanisms in term of the thermal instability model.