A missing piece of the Eureka flag has been unveiled in Ballarat on the 159th anniversary of the Eureka Stockade.

The Southern Cross flag was trampled, torn and peppered with shots during the confrontation at the stockade.

About 40 per cent of it is missing and it is currently housed at the Museum of Australian Democracy (MADE) at Eureka in Ballarat.

In October, the museum put out a call to find the missing pieces.

Museum director Jane Smith says the small, blue fragment has a direct connection to the leader of the Eureka stockade, Peter Lalor.

He gave the piece to his cousin, Francis Hanlon.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 8 minutes 4 seconds 8 m Adrian Millane speaks to Dominic Brine about the history of the tiny fragment of the Eureka flag. Download 3.7 MB

"It's been passed down in the Hanlon side of the family for generations and most (recently) to a man named Adrian Millane, who lives in Nambour," she said.

Mr Millane says the fragment has been part of the family folklore for generations.

"Three generations have cared for this little scrap of rag," he said.

"My Aunt Dorothy would often show and tell the story of the cousins and the Eureka legends when family or friends came to visit."

Mr Millane is loaning the little piece of history to the museum.

Sorry, this video has expired Another fragment of the Eureka flag found in Queensland ( Michael Rowland )

"The opportunity provided by (the museum) to confirm its authenticity is fantastic," he said.

"After all these years I now know that this is definitely a piece of the Eureka Flag."

The discovery represents another step in the continued restoration of the flag as a symbol of Australian democracy.