The results of optical spectroscopy and photometry from La Palma (Canary Islands) of V404 Cyg are presented. They correspond to the optical counterpart of the new X-ray transient GS2023+338 discovered by Ginga. The overall light curve is similar to that of the previous optical outburst of this object, recorded as Nova Cyg 1938 and classified as a classical nova. It is not a classical or recurrent nova. The large range in optical brightness and intense X-ray emission at maximum indicate that the system must be a low-mass X-ray binary. The optical spectrum is unlike any known LMXB or X-ray transient in that it displays strong, broad, variable and complex emission lines of H, He I and He II. The reddened spectrum and interstellar absorption features indicate a problable distance in the range 1 to 3 kpc. Charged coupled device photometry reveals that the source is variable, but gives no indication of the orbital period, there being no eclipse or regular modulation.