The strapless, silk taffeta dress' revealing cut and striking black color caused a minor scandal when Diana was pictured wearing it to a charity event in 1981. But while some thought it too daring, it helped turn the 19-year-old royal bride-to-be into an overnight fashion icon.
"It is a very different dress from what royalty wore at that time in England," said Hernan Garcia, director of the Museo de la Moda in Santiago.
"It marks the change that she continued to make both in her country and around the world," Garcia said. "It is a symbol of the (fashion) changes that were to come later."
The museum purchased the garment Tuesday for nearly 200,000 pounds (more than $275,000) - several times the original estimated value.
It plans to make the gown the centerpiece of an exhibit opening this month titled "Back to the '80s."
Last year, the Museo de la Moda displayed clothing that belonged to the late pop superstar Michael Jackson.