In a dusty vault deep in the heart of the Newcastle Cathedral, an unsuspecting cardboard box sat forgotten for years.

But that box contained one of our most significant artefacts from World War I — Australia's first national flag.

Known as the Birdwood Flag, it was flown at the headquarters of General William Birdwood at the Western Front.

General Birdwood was in command of the Australian troops, who at the time were fighting for the "Empire".

"Our nation was only about 13-14 years old at the start of the first world war and the Union Jack, what we see as an English flag, was the main flag that our troops fought under," Patricia Gillard of the Birdwood Heritage Committee said.

Dr Patricia Gillard said Australian troops were proud to serve under their own flag. ( ABC News: Jake Sturmer )

"But from 1917 on, our troops in Europe fought under a red Australian ensign and they were proud of it.

"It was created by a group of [Newcastle] women led by Dora Sparke, who decided that the Australian troops should have an Australian ensign for the General to display and fly over his headquarters."

After the war, the flag returned to Newcastle Cathedral — which also was of the nation's earliest war memorials — where it hung for decades before disintegrating.

'It just looked like confetti'

It was thought to be lost forever, "but a far-sighted dean had been quietly collecting the bits and storing them away safely", according to current dean Stephen Williams.

Several years ago, Dean Williams stumbled across what looked like a "pile of rubbish".

"Eventually we emptied this vault out and discovered [the flag] here in the corner of the vault and it was in a bag within a bag inside a bag inside a box — just an ordinary cardboard box — and it just looked like confetti," Dean Williams said.

"We're very, very fortunate that no-one had thrown it out."

The flag looked more like confetti than a national treasure when it was found. ( ABC News: Jake Sturmer )

The bag of "confetti" ended up in the hands of Julian Bickersteth in Sydney.

"We've worked on lots of flags but never anything like [one in] this condition — this is a very complex job," he said.

Over 18 months, he and his team assembled the hundreds of pieces of silk like one would a jigsaw puzzle.

"We had a lot of larger pieces, plus we had a lot of stitched edges," he said

Dean Stephen Williams found the flag in this vault at Newcastle Cathedral. ( ABC News: Jake Sturmer )

"You know how with a jigsaw puzzle you do the edge first? Same deal, except here we also have the stars and we have the Union Jack — so we had a lot of stitching that we could work from."

After hundreds of hours of work, the flag has now been restored.

It will be returned and rehallowed — declared holy by a bishop — at the Newcastle Cathedral on July 30.