Researchers from the University of Cambridge and the Natural History Museum in the UK used a comprehensive dataset to analyse over 450 anatomical characteristics of early dinosaurs and correctly placed the creature, known as Chilesaurus, in the dinosaur family tree.
The results, published in the journal Biology Letters, suggest that Chilesaurus effectively fills a large gap between two of the major dinosaur groups, and shows how the divide between them may have happened.
For example, its head resembles that of a carnivore, but it has flat teeth for grinding up plant matter.
"Chilesaurus almost looks like it was stitched together from different animals, which is why it baffled everybody," said Matthew Baron, a PhD student at Cambridge.
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Earlier research suggested that this peculiar dinosaur belonging to the group Theropoda, the 'lizard-hipped' group of dinosaurs that includes Tyrannosaurus, but the new study suggests that it was probably a very early member of a completely different group, called Ornithischia.
The bird-hipped dinosaurs have several common physical traits: the two most notable of these are an inverted, bird- like hip structure and a beak-like structure for eating.
The inverted hips allowed for bigger, more complex digestive systems, which in turn allowed larger plant-eaters to evolve, researchers said.
While Chilesaurus has a bird-like hip structure, and has flat teeth for grinding up plants, it does not possess the distinctive 'beak' of many other bird-hipped dinosaurs, which is what makes it such an important find, they said.
"This shows that in bird-hipped dinosaurs, the gut evolved first, and the jaws evolved later - it fills the gap quite nicely," he said.
"Chilesaurus is one of the most puzzling and intriguing dinosaurs ever discovered," said Professor Paul Barrett of the Natural History Museum.
"Its weird mix of features places it in a key position in dinosaur evolution and helps to show how some of the really big splits between the major groups might have come about," said Paul.