Called the Torso of Rama, the headless sandstone statue dates back to the 10th Century and was taken from the Koh Ker temple during Cambodia`s civil war.
The museum acquired it 30 years ago, and said it only realised it was looted after recent discussions with Cambodia.
"We are joyful with the torso of Rama returning home," government official Yim Nolson was quoted as saying by AFP news agency.
But the 62-inch (158m) statue is still missing its head and other body parts and Cambodia is currently appealing to museums and art collectors to return the missing portions.
The Denver Art Museum said it had acquired the statue in 1986 from a New York gallery.
It had earlier told the Denver Post that it realised that the piece may have been stolen in 2013 when Cambodia identified it as one of several artworks taken from the country during the civil war in the 1970s.
It said it was contacted last year by the Cambodian government which provided additional facts that led to the statue`s return.
In January a French museum returned a 7th Century Hindu statue head to Cambodia 130 years after it was taken.
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