The German Foundation for Prussian Cultural Heritage is expected today to approve the return of the painting, L'Olivette, to Gerta Silberberg, whose family had been forced to sell it at auction before the Second World War.
If, as seems likely, the painting, now in the National Gallery in Berlin, is handed back, it will set a precedent in German law that could be applied to several hundred works of art held in the country's galleries and museums.
It could also lead to hundreds of similar cases throughout Europe.
Anne Webber, the co- chairwoman of the European Commission on Looted Art, which was set up last March, described it as a landmark decision.
"It will enable the return of many hundreds of works of art held in Germany, and it is a precedent which will have a knock-on effect throughout Europe," she said.
"Restitution is an issue which the British will now have to deal with.
"The Nazis carried out the greatest art robbery in history. They stole a fifth of all the art in Europe, and much of it is now kept in galleries or private collections."
The Holocaust Educational Trust said that today's expected move could be influential in Jews' efforts to repossess their valuables.
"If the museum is going to agree to return the property in this clear- cut case, this will be a turning-point in the restitution procedure and will set a precedent for Europe and the rest of the world," said a spokesman.
The National Gallery in London has already opened an investigation into the provenance of 120 paintings to determine whether they were looted by the Nazis, and similar inquiries are expected to be carried out at other collections - the Courtauld Gallery, the Victoria and Albert Museum and the Tate Gallery and British Museum.
Mrs Silberberg, 85, who lives in Leicester, said that her father-in-law, Max, was made to sell the painting, with 143 others, at a series of auctions in Berlin.
The Silberberg collection reportedly included works by Cezanne, Manet, Renoir and Degas. Mr Silberberg was later sent to a concentration camp, where he died.
If the painting is returned, Mrs Silberberg will be the first British relative of Holocaust victims to reclaim works that were sold at forced auctions, where property was identified as "non-Aryan".
John Simon, Mrs Silberberg's solicitor, said she had no sense of joy from the prospect of the work's return. "Gerta is (Max Silberberg's) last surviving relative. She came to this country with her husband immediately before the outbreak of the war.
"The search has been going on for some time. The whole issue brings back many disturbing memories for my client and she has no wish to receive the pictures herself."