The galaxy belongs to a new class of objects recently discovered by NASA's Wide-field Infrared Survey Explorer or WISE - nicknamed extremely luminous infrared galaxies, or ELIRGs.
"We are looking at a very intense phase of galaxy evolution," said Chao-Wei Tsai of NASA's Jet Propulsion Laboratory in Pasadena, California.
"This dazzling light may be from the main growth spurt in the size of the galaxy's black hole," said Tsai, lead author of the research appearing in The Astrophysical Journal.
Supermassive black holes grow by drawing gas and matter into a disk around them. The disk heats up to beyond-sizzling temperatures of millions of degrees, blasting out high-energy, visible, ultraviolet, and X-ray light.
The light is blocked by surrounding cocoons of dust. As the dust heats up, it radiates infrared light.
Immense black holes are common at the cores of galaxies, but finding one this big so far back in the cosmos is rare, researchers said.
Because light from the galaxy hosting the black hole has travelled 12.5 billion years to reach us, astronomers are seeing the object as it was in the past.
"The massive black holes in ELIRGs could be gorging themselves on more matter for a longer period of time. It's like winning a hot-dog-eating contest lasting hundreds of millions of years," said Professor Andrew Blain from the University of Leicester.
The new study reports a total of 20 new ELIRGs, including the most luminous galaxy found to date.
These galaxies, which are even more luminous than the ultraluminous infrared galaxies (ULIRGs) reported before, were not found earlier because of their distance, and because dust converts their powerful visible light into an incredible outpouring of infrared light.
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