Orson Welles's Oscar for the 1941 film Citizen Kane failed to sell at an auction at Sotheby's in New York.
The statuette, for best original screenplay, had been expected to fetch up to $1.2m (£586,000).
However, Welles's personal working copy of the script, which also went under the hammer, sold for $97,000 (£47,475).
The sale of the Oscar was controversial as the Academy of Motion Picture Arts and Sciences prefer the awards to remain in the hands of the winners.
To enforce its policy, the Academy requires nominees to sign a contract agreeing "not to sell or otherwise dispose" of the award, should they win.
In addition, the agreement requires that a winner who no longer wishes to retain the statuette should first offer to sell it back to the academy for $1 (49p).
But the no-sale policy did not come into effect until 1950, meaning Welles's Oscar is free to be sold.
The award was believed to have been lost until it appeared at a 1994 Sotheby's auction.
A Los Angeles cinematographer had held it in secret, after Welles gave it to him as payment. Welles's youngest daughter, Beatrice, claimed the Oscar for herself after suing Sotheby's and the cinematographer.
It was acquired by the Dax Foundation in 2003, a Los Angeles-based charitable foundation which decided to sell the Oscar.
Proceeds made from the sales of the script will help fund the organisation's worldwide humanitarian efforts, a spokeswoman said.