"blanchisseuses souffrant des dents" (Laundry women with toothache) of the Museum Havre in Normandy, where it was stored by the Louvre since 1960 in 1973 was stolen.
Sotheby's removed the painting of auction after being warned by the French authorities.
The painting was expected to fetch $ 350,000-450,000 in a sale of Impressionist art.
A staff member of the Museum of Havre spotted the painting in the catalogue, a French official told the news agency AFP.
"We contacted Sotheby's agreed to pull off the auction," said the official.
"We will start friendly negotiations with the owner who seems to be of good faith through the auction house."
US and French police are investigating how the painting turned on the auction.
It was understood not to be on the Interpol international stolen art list.
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