The king commissioned the piano for the palace from renowned maker Thomas Tomkison in about 1821.
The instrument displays the flamboyant taste Tomkison shared with the king.
It was bought by Brighton and Hove City Council with funding from Arts Council England and the Victoria and Albert Museum,
The piano is thought to have been removed from the Pavilion by Queen Victoria after she ascended the throne in 1837.
However, its whereabouts for many years are unknown and it is thought to have held in private collections.
A Brighton Pavilion spokeswoman described the instrument as "an elegant rosewood grand, extravagantly decorated, inlaid with brass, gilt mouldings and gilt turnbuckles, with elegantly carved legs".
Councillor Alan Robins said: "King George's piano has long been on a wish list of desirable assets for the Royal Pavilion and so we're thrilled to have brought it back to its rightful home.
"The piano is playable but as it's been dormant for 20 years will need some restoration. It would be amazing to be able to hear music of the period played on it."
King George IV's only known surviving grand piano has been returned to Brighton's Royal Pavilion after being bought at auction for Â£62,000.