The handleless blunt-edged dagger, known as the Oxborough dirk after being found in My Lord's Wood, near Oxborough, may have lain there for more than three millennia.
It had probably been placed upright in the peat about 1400BC, according to experts who believe it may have been a ritual artefact used by a wetland cult. Similar finds have been made in wetlands areas in France and the Netherlands.
Last year it was auctioned at Christie's and was sold to an American collector for £52,000. Under heritage export rules, the sale was delayed to allow a British institution to match the price, and the British Museum then bought it with the help of a £20,000 grant from the National Art Collections Fund.
David Barrie, the director of fund, said that the dirk was the most beautiful things he had ever seen in his time at the charity. "It was found in the most remarkable way by a man who stubbed his toe on it. He bent down and literally pulled it out of theground like Excalibur."
It goes on show at the British Museum on 15 February.Reuse content