M. pfefferi has been recorded from sand and mud substrate in shallow waters at depths of 3 to 86 m. The species is active during the day and has been observed hunting fish and crustaceans. It employs complex and varied camouflage to stalk its prey. The normal base color of this species is dark brown. Individuals that are disturbed or attacked quickly change colour to a pattern of black, dark brown, and white, with yellow patches around the mantle, arms, and eyes. The arm tips often display bright red coloration to ward off would-be predators. Animals displaying this colour pattern have been observed using their lower arms to walk or "amble" along the sea floor while rhythmically waving the wide protective membranes on their arms. This behavior advertises a poisonous nature, the flesh of this cuttlefish contains a unique toxin.