The flag, which flies on Grosse Rocque, disappeared in October.
The fishermen who normally look after it suspected it had been removed deliberately, but did not have an opportunity to visit the pole until recently.
They found the flag had been cut down.
Repairs to the pole, stays and halyard are being prepared for the annual hoisting on Liberation Day.
Roy Bisson, who is a supporter of the flag and can see Grosse Rocque from his house, said it was disappointing that this had happened.
'Islanders may care to look out for this very unusual Guernsey flag, which is especially reinforced for use on the Grosse Rocque.
Mr Bisson said the flag was in good condition when it was stolen, but because the toggle was left behind on the pole, it will be difficult to fly.
A replacement flag, which was blessed on the Cobo slipway last Liberation Day, is with the fishermen ready to be hoisted.
'Such a shame the pleasure of watching the flag has been lost during the winter,' Mr Bisson said.