A 40-year-old man has been charged with possessing a prohibited firearm after police seized a German submachine gun during a traffic stop on the New South Wales Central Coast last night.

Police found the MP40 submachine gun after they pulled over a Holden Commodore at The Entrance about 7:40pm.

The weapon was developed in Nazi Germany and used extensively in World War II.

Police seized a bag containing the gun, a magazine and 60 rounds of ammunition. The gun's barrel was missing.

The man police charged was a passenger in the vehicle, which was stopped on Oakland Avenue.

Police said the gun appeared to be in working order.

Shane Casey, senior curator at the Australian War Memorial, said the weapon was used extensively by the German army.

"It's a very robust weapon and was also souvenired during the war by Allied soldiers," he said.

"We've got examples here in our collection. You would find it after the war being used in Northern Ireland and there's also examples that have turned up in Vietnam and Cambodia.

"Initially it would have been designed to be carried by troops in vehicles or paratroopers because it's quite small and has a folding stock."

Mr Casey said the weapon was collectible.

"Anyone who is interested in Germany army history or the second World War would recognise this weapon immediately," he said.

The weapon will undergo a forensic examination to determine if it was linked to any shooting incidents.

The man will appear in Wyong Local Court today.