It was what every art expert must dream of. Discovering two lost' Renaissance masterpieces - in this case, two small panel paintings of saints by Fra Angelico hanging behind the door of a spare bedroom in an elderly woman's two-up two-down terraced house in St Ebbe's, Oxford.

Then, in November 2006 announcing to an astounded art world that the panels were the missing pieces from Fra Angelico's magnificent high altarpiece painted around 1440 for his own church in the Dominican friary of San Marco in Florence.

The discovery solved a long-held puzzle over what the altarpiece - regarded as one of the artist's most important works, indeed one of the principal Renaissance works produced in 15th century Florence - had looked like before it was dismantled.

The panels belonged to the late Miss Jean Preston. Miss Preston had been a curator of mediaeval manuscripts in Washington, Yale, at the Huntington Library, California and at Princeton University, before retiring to Oxford in 1996. She had found the panels while living in California, picking them out from a box of manuscripts and paintings she was looking over for her distinguished art collector father, Kerrison Preston. He bought them in April 1965, bequeathing them to his daughter nine years later.

Invoiced as "Panel paintings of Dominican Saints, 15th century, Italian" they had cost him $200. In April last year they were sold by the auctioneers Duke's of Dorchester for £1.7m, a record price for an Old Masters sale outside London.

For three decades the panels hung, unsung, in their owner's home. Then, shortly before her death in 2006, Miss Preston asked her former university, Bristol, for an opinion on some artworks in her collection.

Art historian Michael Liversidge, Emeritus Dean of Arts at the University of Bristol, an Abingdon School pupil in the 1960s, takes up the story.

"I wasn't asked to look at the panels specifically," he says. "I just happened to spot them on one of my visits behind a door tucked in a corner of a spare room."

They had all the indicators of age and authenticity, so he took photos and went away to research them. It wasn't long before it became clear that they had to be from the Fra Angelico altarpiece.

"It was quite obvious really once I'd come up with the other panels. I just knew' if you like," he recalled. "They had all the indicators: the iconography, the same painting style, the same marks left by the original frame, and the same size as the others. Then, with some trepidation, I showed them to experts in the field, and to my surprise they said: I think you might be right.'"

The other panels he refers to are the six upright paintings of individual saints that were in the frame's side columns, now dispersed in galleries worldwide. They are small works, each measuring between 38-39cm by 14-15cm, painted in tempera on poplar wood with a gold leaf background. Each saint has a gilded punchmarked halo and stands on an ultramarine cloud (like a statue on a corbel). The clouds have vanished from the Oxford panels, presumably removed by an earlier restorer, but leaving traces behind. The figures either look in towards the centrepiece, or directly out towards the congregation, the direction of the gaze offering clues for placement.

The San Marco altarpiece was an important commission by Cosimo de Medici in 1438, coinciding with the rebuilding of San Marco by his favourite architect Michelozzi Michelozzo: a public statement of piety by the Medicis.

A consensus exists that the altarpiece originally consisted of 18 painted panels set within an elaborate wooden frame - nine predella panels (paintings set into the lower edge of a large altarpiece) showing scenes from the life of saints Cosmas and Damian grouped around a Lamentation scene, the (now) eight saints, and a large centrepiece.

It is generally accepted that the saint figures are all painted by the same hand. And that although Fra Angelico was known to employ assistants in his workshop at busy periods, sometimes to complete parts of a project, it is unlikely in this case that assistants painted any of the altarpiece's constituent parts.

As Mr Liversidge writes in Duke's auction catalogue: "It seems inconceivable that he would have done so for one a commission that Cosimo de Medici was paying for, and which was so important to the conversion of San Marco into a Medici church."

Cosimo, in the guise of Cosmas, his patron saint, kneels looking out at the viewer at the front of the centrepiece. This shows the Virgin and Child enthroned amongst angels and saints, including the friary's patron saint, Mark, and Dominic, the Dominican Order's founder, as well as Cosmas and Damian (two of the patron saints of doctors venerated by the Medici family; medicis' means physicians).

Although it suffered a disastrous attempt at cleaning in the early 19th century, it remains a marvellous painting.

The altarpiece was probably dismantled some time during the Napoleonic wars and dispersed during the course of the 19th century when interest in early Italian artists was on the increase. The frame was presumably destroyed. What survives is in public collections worldwide, including the Louvre, Paris, the Altepinakotech, Munich, and the National Galley of Ireland, Dublin; one is in a private collection. The centrepiece and two predella panels remain in Florence in San Marco's museum.

With no frame to refer to and no reliable record of the design, the question of how the altarpiece fitted together was left open - also how many saint panels there were originally.

This led to more than one hypothetical reconstruction. In Duke's catalogue Michael Liversidge says the key to reconstructing the altarpiece lies with the predella panels. Previously, some had suggested there were 16 saint panels arranged in four columns of four in the frame pilasters and that they continued around the sides of the frame in line with the predella panels; others considered there were ten.

Mr Liversidge argues a more likely hypothesis is that there were eight saints in total, all facing the front and visible to the congregation (see photograph).

This means that, together with the Oxford panels, all the single figure images are accounted for. And it finishes the job of reconstructing the "magnificent altarpiece" singled out by Giorgio Vasari in his 1550 Life of Fra Angelico.

But who were the two new saints? Faint traces of lettering on the halo of one identifies him as the Dominican Saint Vincent Ferrer, a preacher of hell fire sermons who travelled across Europe (hence, his staff) and was confessor to Pope Benedict XIII. The identity of the second is unknown.

The panels were bought by Fabrizio Moretti, a leading art dealer in early Italian and Renaissance paintings with galleries in London, Florence and New York. They were subsequently bought by the Sovintendenza per il Polo Museale Fiorentino with a contribution by Ente Cassa di Risparmio di Firenze, and as a result are destined to return to San Marco to its museum.

The dscovery was "a once-in-a-lifetime event" for art historian Michael Liversidge, and hailed as "one of the most exciting finds for a generation" by others. But Miss Preston? What was her reaction?

"She was very pleased but did not express astonishment," Mr Liversidge recalled. "She knew they were good paintings but had no idea what they were. She was pleased that her eye' had been correct. As a mediaevalist she was interested in them for their academic content - not remotely for their cash value."

"Very nice," she said, before hanging them back on the wall.