A Pumpkin Lantern is a stationary light source, though it can be carried in the inventory and (re)placed any time. It requires 1 Pumpkin and 1 Fireflies to craft and an Alchemy Engine to prototype. It only illuminates during dusk and night.
The Pumpkin Lantern perishes (leaving nothing) after being on the ground for 10 minutes (1 game days) in Summer and after 13 minutes 20 seconds (about 1 game days) in Winter. Once on the ground, it can be picked up by pressing the Space Key at any time or by Left Mouse Button (LMB) while not having any tools or weapons equipped, otherwise it will be attacked and smashed, leaving the fireflies behind (which can be seen at night). The Pumpkin Lantern's perish/spoilage timer will not reset when picked up and deposited on the ground again.

As of the "Hungry for Your Hunger" update, pumpkin lanterns can no longer be murdered while in inventory, so it is no longer possible to retrieve an unspoilt pumpkin (or any pumpkin) from a pumpkin lantern.