The 1911 cubist painting from 1911, which is valued at $15 million, was found in a shipment from Belgium to Newark, New Jersey, in December 2014.
A label described the painting as a mere handicraft worth $37.
The artwork was handed over to the French embassy in Washington by US Immigration and Customs Enforcement officials.
“We’re so glad that it’s going to be shown to the world again,” the agency’s director, Sarah Saldana, was quoted as saying by Reuters.
Picasso’s painting was last seen on public display in Munich, Germany, in 1988.
It was then returned to Paris’ Centre Georges Pompidou. The museum reported it stolen from its archives in 2001.
Experts from the museum authenticated the painting as Pablo Picasso’s earlier this year.
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