Dubbed the Black Ring of Leamington Spa, the strange phenomenon was captured by Georgina Heap, 16, on her iPhone on Friday evening near Warwick Castle.
Fire services have said no fires were reported at the time and the Met Office have said it does not appear to be weather-related.
Heap said it was "the weirdest thing I have ever seen".
"I looked up at it and thought 'what the hell?', it was amazing.
"It was just floating there like a cloud and then it disappeared. It wasn't birds either.
"There were about ten of us who stopped what we were doing and watched."
UFO expert, Nick Pope, described the video as "truly bizarre" and ruled out it being a smoke ring.
He added: "One other possibility is that the shape is made up of millions of bees or other insects, but I've never heard of insects behaving in this way before, so if this is the explanation, it's a real-life X-File."