By Anne VanderMey
April 3, 2014

FORTUNE — When Paul Revere rode from Boston with news that the British were coming, it would still be one year before America declared independence, and two years until it institutionalized the stars and stripes on the American flag. When the Minutemen responded to that first assault, most carried the flags of their local militias, many of them with British insignia.

One of those was the Forster Flag, about three yards of crimson silk, which will go on the auction block on April 9 at Doyle New York. The flag was likely carried by the Manchester Militia Company on April 19th 1775, the day after Revere’s ride.

The flag is expected to fetch between $1 million and $3 million at auction, but could go for considerably more.

The seller is the Flag Heritage Foundation, which will use the proceeds to create an endowment at the University of Texas’s Dolph Briscoe Center for American History.

The only hitch is that the university wants to keep it, too.

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If all goes according to plan, whoever buys the Forster Flag next week will donate it back to the University of Texas — or at least loan it to the Briscoe Center. It’s an interesting gamble: In order to hire a curator for its large new collection of flags and iconography, the university needs someone to buy the Forster Flag for at least $1 million. But if it sells to a bidder who isn’t inclined to donate it back (for example, another museum), the new collection will be without its centerpiece.

“We’re just holding our breath,” says Don Carleton, executive director of the Briscoe Center. “You never know with auctions.”

The Forster flag is a particularly remarkable artifact of the colonial era. After the initial days of fighting, the revolutionaries removed the British iconography and replaced it with 13 white stripes. Today, this is the earliest existing flag to use 13 stripes to connote the 13 original colonies — also making it one of the earliest American flags still around today, period.

“This is extremely, extremely rare,” says Peter Costanzo, director of the book department at Doyle. “Textiles of the time period are basically nonexistent.” The flag is one of about 1,500 from the time period that existed, and one of only 35 or so that survives today. “Having the opportunity to sell a Revolutionary War-era flag, it’s one of those things that can only come around once or twice in a career,” he says.

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Whatever happens next week, says Briscoe’s Carleton, the most important outcome will be the money raised. The Briscoe Center’s new collection is considered the most important archive of flag iconography in the world. It’s called the Whitney Smith Flag Research Center Collection, after Whitney Smith, who founded the Flag Heritage Foundation and coined the term vexillology (the study of flags). It took two 58-foot trailers to haul the full collection from the foundation’s Boston location down to Texas. With the endowment funding expected to come from the sale of the Forster Flag, a new curator for the collection would explore the history of physical flags, as well as the patriotic instinct they represent. “As a historian I am very interested in how we view our heritage, as opposed to actual history,” Carleton says. “Oftentimes the symbols are more important than the facts.”

Most flags from the Revolutionary War couldn’t be considered, “American flags.” In the early days of the war, a militia was more likely to fly a flag with the number of the regiment or local iconography, and often flags incorporated British symbols. On New Year’s Day in 1776, George Washington is said to have flown a version of an American flag that incorporated a Union Jack — the British initially thought it was a sign of surrender.

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Creating a flag to represent the 13 colonies was unusual. The Forster Flag, with its 13 stripes, was stitched together in haste and with a lack of materials, says Doyle’s Costanzo. Still, it’s recognized as one of the first examples of an American nationalistic impulse. “It’s a very important iconographic precursor to the American flag as we know it today,” he says.

After the war, the flag collected dust for 200 years in the private collection of the Forster family, descendants of Samuel Forster, a prominent shipmaster from Manchester, Mass. That’s likely why it has survived until today, with barely any sun damage — unusual for flags so old. Most from that time period disintegrated, were sold in pieces as souvenirs, or were repurposed as dresses.

Unlike the University of Texas staff, who are anxiously awaiting the outcome of the sale, Costanzo seems fairly Zen about the flag’s future. No matter who buys it next week, “I think it’s going to be a known entity from here on out,” Costanzo says. “I don’t think it’ll ever go back to being in a drawer.”

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