We present new 144-MHz LOFAR observations of the prototypical `X-shaped' radio galaxy NGC 326, which show that the formerly known wings of the radio lobes extend smoothly into a large-scale, complex radio structure. We argue that this structure is most likely the result of hydrodynamical effects in an ongoing group or cluster merger, for which pre-existing X-ray and optical data provide independent evidence. The large-scale radio structure is hard to explain purely in terms of jet reorientation due to the merger of binary black holes, a previously proposed explanation for the inner structure of NGC 326. For this reason, we suggest that the simplest model is one in which the merger-related hydrodynamical processes account for all the source structure, though we do not rule out the possibility that a black hole merger has occurred. Inference of the black hole-black hole merger rate from observations of X-shaped sources should be carried out with caution in the absence of deep, sensitive low-frequency observations. Some X-shaped sources may be signposts of cluster merger activity, and it would be useful to investigate the environments of these objects more generally.