To find the Killbug the player must have spoken to the "Huntmaster" in Phon Coast and defeated Thalassinon, which will trigger the start of the Rare Game quest.
The Killbug is found on the Ozmone Plain in the area called The Switchback. It is located on the northern edge of the area near the entrance to Zertinan Caverns when the clock is between 10 and 39 minutes. It is fairly easy to spot as it does not match any of the other treasure chests found on the plains, and is larger than usual. This enemy is also a Trophy Game, and thus it can never be found again after having been slain.