It was thought the 1929 locomotive, called "Newstead", had been scrapped.
However, it had been saved by an enthusiast who had it restored and then built a small track and shed at a convent near his home, where it remained for almost 30 years.
It will be displayed at the Nene Valley Railway in Peterborough this weekend.
Newstead - a Hunslet 16-inch saddle tank design - was used to transport coal at Woolley Colliery, on the border of South and West Yorkshire, before being purchased by vintage vehicle collector Malcolm Saul in the late 70s.
Live: More on this and other stories from Cambridgeshire
His widow Jane, said: "Malcolm said to me one day, 'I'm going to have an engine', and I said, 'Oh don't be silly'. Then it arrived."
It was stored in a specially built shed on land Mr Saul rented from a convent next door.
The engine was sent to Suffolk for a two-year refurbishment in the 1990s and then returned to its shed, where it remained.
"Malcolm loved it, and used to tinker with it all the time. He always said one day he'd build a longer track and we'd see it in steam again," Mrs Saul said.
When her husband died she contacted the Small Loco Group at the Nene Valley Railway, who went to see Newstead and described it as "one of the biggest preservation stories of the 21st Century so far".
The engine will be transported the 90 minutes up the A1 on a flatbed truck later, before being put on show at the Peterborough museum as part of its celebration of industrial steam locomotives.
"Newstead's owner died before he got the chance to play with her properly," Alex Alder from the Small Loco Group said.
"We will restore it and put it in steam again. We want to finish what he started."

Opponents Yorkshire will be without England players Joe Root and Jonny Bairstow while overseas batsman Travis Head has been called up by Australia.
Fellow Aussie Tait still expects Yorkshire to be dangerous at the SSE Swalec Stadium on Thursday.
"They're a good side so they're going to come here thinking we've got a pretty good side as well," he said.
"Our chances are pretty good. It's going to be a good clash - a very important match for Wales."
The game against Yorkshire is Glamorgan's first home quarter final for 12 years, with treble-chasing Yorkshire starting as favourites.
"I see Travis Head has gone home so that's one bloke we don't have to worry about for Yorkshire," added Tait.
"But they still have David Willey, Liam Plunkett and Tim Bresnan - they're pretty experienced.
"Adil Rashid is absolutely their danger man with the ball.
"There's some really experienced players there who have played international cricket - there's not one stand out."
"From our point of view we just want to make that finals day and whoever stands in our way we're just going to try to knock them off.
"Yorkshire are first up for us and if we can do them on Thursday we head off on the 20 August and have a shot at it."
Both semi-finals and the final will be played at Edgbaston on Saturday, 20 August.
An industrial steam engine last used to haul coal in the 1970s has been "rediscovered" at a convent in the east of England.
[NEXT_CONCEPT]
Fast bowler Shaun Tait says Glamorgan have a good chance of progressing to the T20 Blast finals day.