MELBOURNE has recovered its cherished 1948 VFL premiership flag.

The treasured heirloom appeared on eBay earlier this week with a reserve price of $80,000 and once the Demons became aware of the listing the club contacted the auction website and the AFL's integrity department.

Police were notified and their investigation led them to a New South Wales property where the flag was seized.

Demons spokesman Ryan Larkin told Fairfax Media of the club's relief.

“It's obviously an important part of the club's heritage and we appreciate the efforts from the AFL, Victoria police and the NSW police in recovering the item,” Mr Larkin said. 

“Unfortunately we still have a number of our past flags that are unaccounted for but this is a valued addition to the collection.” 

Deniliquin area commander for New South Wales police, Acting Superintendent Michael Tranby, described the flag's condition as "fragile".

"We’re trying to preserve it as much as we can so when it gets returned back to Victoria and wherever it ends up, it remains in good condition,” Acting Superintendent Tranby said.

The 1948 Grand Final yielded the Demons' sixth premiership.

The match saw the first drawn Grand Final in AFL history between Melbourne and Essendon, before the Demons rollicked to a 39-point victory the following week.

With premiership trophies not being introduced until 1959, nine of Melbourne's premierships were celebrated with flags. The 1948 triumph was, of course, one of them.

The joint Victoria and New South Wales police investigation is ongoing.