The aircraft was discovered by water workers laying a pipe next to a railway line.
Army bomb disposal officers were called to the Middlesbrough site on Wednesday to deal with what was first believed only to be ammunition.
But further investigations revealed it was part of the wreckage of a German plane, which could be a war grave containing the bodies of the crew.
The site has been cleared and rail traffic was stopped for a while, as police feared there could be live ammunition and bombs on board the plane.
A machine gun, part of a propeller, wheels, part of the undercarriage and a parachute have been found.
John Keenan, engineer in charge of the site, said: "The first thing we found was the ammunition but then it became almost like a time capsule."
"The plane isn't in one piece. The wreckage was charred so it must have caught fire when it crashed. It was just underground because it came down in soft clay."
"The machine gun was in very good condition and even had a bullet still in the barrel. We also found a woollen jumper as well as the unopened parachutes."
The army, whose experts say the aircraft had probably been shot down before it had delivered its load, sent a team of experts from Kent to investigate the wreckage.
The industrial site was a regular target of Luftwaffe bombing raids during the Second World War.
A police spokesman said: "The area has been sealed off and the experts will continue the delicate task of ensuring the area is safe. Until that is done, no real digging up of anything can take place."