The 5.2cm (two inch) solid silver Declaration Pound dates from 1643, a year after the English Civil War broke out.
It was struck in Oxford, at a new mint created to launch an official currency under Royalist control.
The coin's owner, from Dorset, took it into a Dorchester auction house, unaware of its significance.
Timothy Medhurst, a coin specialist at Duke's Auctioneers, said: "The coin has been handed down through several generations to the current owner, who had no idea of its value.
"It is a coin which is rare to find and it will cause a stir in the coin collecting world."
Its owner does not know how long it has been in their family or where it originally came from.
The coin marks Charles I's attempts to regain his failing power from the Parliamentarians led by Oliver Cromwell.
A legend inscribed on the back of the coin in Latin reads: "Let God arise and let his enemies be scattered".
It is seen as a declaration of the king's power and his belief in absolute monarchy.
The coin will be auctioned at Duke's on 12 March.
According to the National Archives, £1 in 1640 would have been worth £85.80 in 2005.
An "extremely rare" £1 coin is expected fetch up to £50,000 when it is auctioned off.