The vast collection, which experts say has "a value so high it cannot be estimated," was recovered in a raid by German tax authorities, in connection with an investigation into tax evasion, in February and March 2012.
At a press conference in Germany on Tuesday, experts revealed that more than 1,300 artworks -- many long feared lost or destroyed, and some which had never been recorded -- had been discovered.
Among the haul were paintings by Pablo Picasso, Henri de Toulouse-Lautrec, Oskar Kokoschka, Canaletto, Pierre-August Renoir, Franz Marc and Gustav Courbet.
"A total of 121 framed and 1,285 unframed works, among them works by famous artists, were seized," prosecutor Reinhard Nemetz announced. "There were oil paintings, works in india ink, pencil, watercolors, lithographs and prints."
Nemetz said there were "concrete indications that [some of it] is so-called 'degenerate art' or stolen art."
Thousands of pieces of art condemned as "degenerate" by the Nazis were confiscated from galleries and private collectors in the 1930s and 1940s. Other works were stolen from Jewish families or sold for a fraction of their true value as the owners tried to flee the country.
"The German government is supporting the state prosecution in Augsburg by supplying advice from experts in the field of so-called degenerate art and the entire issue of Nazi-looted art," government spokesman Steffen Seibert said. "But we cannot comment any of the issues of the ongoing investigation."
The collection's existence only came to light this past weekend, with an article in the German news magazine Focus
, which reported that that the pictures were found when customs police raided the rundown apartment in the Schwabing district of Munich last year. The recovered paintings are said to have been kept in storage in a secure warehouse in the city ever since.
The Munich apartment where the artworks were found belongs to Cornelius Gurlitt, 80. Gurlitt's father Hildebrand was an art collector who dealt in works for the Nazis, according to art historians. Hildebrand Gurlitt had claimed the works were destroyed in Allied firebombing near the end of the Second World War. It is not clear how his son came to be in possession of the paintings.
The authorities say Cornelius Gurlitt was unknown to them. He was not on any of the tax rolls and not even known by social security. No charges have been filed against Gurlitt, he is not under arrest, and the prosecutor said it is not clear which laws if any had been violated.
Art historian Meike Hoffman, who has been cataloging the collection, said it contained important pieces of the highest quality -- some of which were completely unknown.
"To stand in front of these works, which have for a long time been thought missing, lost or destroyed and to see them in a relatively good condition -- in part a little dirty, but not damaged -- gives one a somewhat eerie feeling of happiness.
"Many of the works were not known at all, previously, so they will have a big impact on research into the artists concerned, once the investigation is complete and they can be revealed publicly."
The relatives of many Jewish families whose art collections were plundered during the Nazi era are now expected to launch legal action to try to reclaim their property.
"We demand that the paintings be handed back to their original owners," said Ruediger Mahlo, representative of the Conference on Jewish Material Claims against Germany
Speaking to CNN before the full extent of the discovery became clear, Julian Radcliffe, chairman of the Art Loss Register
, said it was "very encouraging... but there are tens of thousands of artworks still under dispute, so this is really just a drop in the ocean."