Nottingham City Council has been paid back £2.5m of the £42m it invested in collapsed Icelandic banks.
Council officials said the cheque was the "first payment" from the banks and they hope to recover the full amount in subsequent instalments.
The payment was negotiated by the Local Government Association, which is trying to recover more than £840m on behalf of councils across the country.
Nottingham had the second highest amount in the UK tied up in Iceland.
Council leader Jon Collins said: "The city received the first payment of £2.5m and we're confident that we will get the money back."