The Nanteos Cup was stolen from a house during a burglary in Weston Under Penyard near Ross-on-Wye in Herefordshire, in July last year.
The wooden chalice, which measures 10cm by 8.5cm, was the subject of an appeal on the BBC's Crimewatch programme and a special police team was set up to find it.
West Mercia Police said the cup was found after "several significant lines of inquiry from anonymous sources".
Officers said the chalice was handed to them "on neutral ground" in a pre-arranged meeting last week.
A spokesman for the force said: "An anonymous source came forward after seeing the Crimewatch appeal which resulted in it being physically handed in.
"Some people may class it as the Holy Grail, but that's only speculation.
"As far as the police are concerned this is a treasured object, and we are happy to have reunited it with its rightful owners.
"We take the theft of any item very seriously."
Detective Inspector Martyn Barnes, the investigating officer, said: "I would like to thank everyone who helped us with our inquiries and who shared the appeal, which significantly aided us in recovering the cup.
"Following the recovery of the cup, no arrests have been made and inquiries into the theft continue.
"However, we are very pleased it has now been returned to its rightful owners."
There had been a reward of £2000 for the cup's recovery and the successful conviction of the thieves but police said because nobody had been prosecuted, it would not be paying that reward.