We discuss the X-ray and optical properties of the massive galaxy cluster MACS J1206.2−0847 (z= 0.4385), discovered in the Massive Cluster Survey (MACS). Our Chandra observation of the system yields a total X-ray luminosity of 2.4 × 1045 erg s−1 (0.1–2.4 keV) and a global gas temperature of 11.6 ± 0.7 keV, very high values typical of MACS clusters. In both optical and X-ray images, MACS J1206.2−0847 appears close to relaxed in projection, with a pronounced X-ray peak at the location of the brightest cluster galaxy (BCG); we interpret this feature as the remnant of a cold core. A spectacular giant gravitational arc, 15 arcsec in length, bright (V∼ 21) and unusually red (R−K= 4.3), is seen 20 arcsec west of the BCG; we measure a redshift of z= 1.036 for the lensed galaxy. From our Hubble Space Telescope image of the cluster, we identify the giant arc and its counter image as a sevenfold imaged system. An excess of X-ray emission in the direction of the arc coincides with a mild galaxy overdensity and could be the remnant of a minor merger with a group of galaxies. We derive estimates of the total cluster mass as well as of the mass of the cluster core using X-ray, dynamical and gravitational-lensing techniques. For the mass enclosed by the giant arc (r < 119 kpc), our strong-lensing analysis based on Hubble Space Telescope imaging yields a very high value of 1.1 × 1014 M⊙, inconsistent with the much lower X-ray estimate of 0.5 × 1014 M⊙. Similarly, the virial estimate of 4 × 1015 M⊙ for the total cluster mass, derived from multi-object spectroscopy with Canada–France–Hawaii Telescope (CFHT) and the VLT of 38 cluster members, is significantly higher than the corresponding X-ray estimate of 1.7 × 1015 M⊙. We take the discrepancy between X-ray and other mass estimates to be indicative of pronounced substructure along the line of sight during an ongoing merger event, an interpretation that is supported by the system's very high velocity dispersion of 1580 km s−1.