It is considered a national treasure and disappeared in 1988 after a tomb in northern Peru was raided and its contents sold on the black market.
It was handed to a firm of solicitors in central London by one of its clients who did not know it was stolen.
The headdress, depicting a sea god, dates back to 700AD.
It is an example of ancient Peruvian Mochica civilisation art and is regarded by experts as one of the most important artefacts in Peruvian cultural heritage.
"an archaeological object [of] the utmost historical and aesthetic importance"
Dr Walter Alva, director of the Royal Tombs of Sipan Museum in Peru, described the seizure as "a very important moment in the worldwide war against illicit art and the looting of my country".
"We are speaking about an archaeological object [of] the utmost historical and aesthetic importance, which is one of the most important ornaments of the ancient Peruvian cultures," he added.
It was recovered by officers from Scotland Yard's Art and Antiquities Squad, who will now send it back to Peru.
No-one has been arrested and the investigation is now in the hands of the Peruvian authorities.
The investigation also drew on the expertise of Michel Van Rijn, an art dealer with extensive experience of hunting for illicit and stolen works of art.
He said: "It is impossible to put a price on a piece of history and world heritage such as this because they never come on the market, but should it do so, it could potentially reach in excess of £1m."
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