Long γ-ray bursts (GRBs) are the most dramatic examples of massive stellar deaths, often associated with supernovae. They release ultra-relativistic jets, which produce non-thermal emission through synchrotron radiation as they interact with the surrounding medium. Here we report observations of the unusual GRB 101225A. Its γ-ray emission was exceptionally long-lived and was followed by a bright X-ray transient with a hot thermal component and an unusual optical counterpart. During the first 10 days, the optical emission evolved as an expanding, cooling black body, after which an additional component, consistent with a faint supernova, emerged. We estimate its redshift to be z = 0.33 by fitting the spectral-energy distribution and light curve of the optical emission with a GRB-supernova template. Deep optical observations may have revealed a faint, unresolved host galaxy. Our proposed progenitor is a merger of a helium star with a neutron star that underwent a common envelope phase, expelling its hydrogen envelope. The resulting explosion created a GRB-like jet which became thermalized by interacting with the dense, previously ejected material, thus creating the observed black body, until finally the emission from the supernova dominated. An alternative explanation is a minor body falling onto a neutron star in the Galaxy.