Pvt George Fly lent the instrument to five-year-old Edna a year after surviving the Battle of Jutland.
After keeping it in the family, Edna's daughter Marian Le May has now handed it back to the Royal Marines School of Music in Portsmouth.
The school said it would be "proudly displayed" in its percussion suites
Mr Fly joined the Royal Marines Light Infantry Divisional Band in Portsmouth in 1894. In 1915 he was drafted to the light cruiser HMS Castor which took part in the Battle of Jutland.
He died in 1934 aged 58.
His family believe he gave Edna the tambourine to use while dancing round the maypole at St Vincent's Royal Marines School at Gosport where she was a pupil.
Mrs Le May, 74, said it had become "part of our family history".
"It was never hidden away or forgotten about. But my grandchildren don't want it - they have plenty of other things to play with - so we spoke to the Royal Marines Band Service and they were pleased to have it," she said.
James Pinney, marketing manager at the school, said: "It will be proudly displayed in a prominent position where trainee musicians can see it and read about one of their brave predecessors."

SeaEnergy issued a statement to the stock exchange to say it is making losses, and trying to sell its assets.
It warned that if it cannot find a deal, it may not be able to keep trading beyond May.
The share price fell more than half following the news, but ended Friday 45% down on the day.
It had already fallen more than 90% in a year - from 30p a year ago to 2.24p at the start of Friday trading.
SeaEnergy was transformed from the oil explorer Ramco, and sought to find a niche in offshore renewable energy.
After being forced to change tack due to a lack of funding for its ambitious wind farm plans, the Westhill-based company has been selling specialist software and specialist shipping technology to the oil and gas industry.
It has also been seeking to diversify into other sectors.
In a trading update, SeaEnergy said progress towards profitability was good until the oil price started falling, in late 2014.
Clients cancelled or postponed orders. There were signs of improvement towards the end of last year, as budgets for 2016 were finalised. "But trading conditions deteriorated further," it has reported.
Costs have been cut, and Sea Energy has given up its ship management role.
"The loan facilities announced in November 2015, which were intended to bridge the gap to improved trading conditions, have proved to be insufficient and the company's cash position is becoming constrained," the company said in its statement.
"Any short term improvement in performance would require a rapid upturn in the oil and gas market."

The American, 28, hit eight birdies in a bogey-free 64 to lead Sung Kang, with Stewart Cink, Jhonattan Vegas and Kyle Stanley another shot back on six under.
England's Justin Rose shot a five-under 67, with 2015 Masters champion Jordan Spieth two more shots adrift.
England's Luke Donald carded a one-under 71, while compatriots Chris Wood and Andrew Johnston are one over.
"They've done a great job here with conditions around the greens and making it as similar as possible to next week," said Fowler, who will be aiming to win his first major at Augusta.
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A tambourine borrowed by a Royal Marines bandsman for his daughter's May Day celebrations in 1917 has been returned 99 years later.
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An Aberdeen firm which supplies specialist services to the oil and gas industry has warned that it is running out of cash.
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Rickie Fowler warmed up for next week's Masters by taking a one-shot lead after the first round of the Houston Open.