The 1623 first edition of the bard's work was stolen from the university in 1998. Its bindings and some pages were removed to try to disguise its origins.
Visitors to the exhibition at the new Wolfson Gallery at the university can view it in its current condition.
It will be conserved to protect it from damage after the exhibition. It is one of the earliest examples of a gathering together of the playwright's work.
Raymond Scott, 53, of Wingate, County Durham, was cleared of stealing the book, but found guilty of handling stolen goods and jailed for eight years in July.
He was also convicted of taking stolen goods abroad.
The folio, which has an estimated value of £1.5m, will form the centrepiece of the Treasures of Durham University in the refurbished Wolfson Gallery.
The new gallery has undergone a £2.3m refurbishment, funded in part by a £500,000 donation from the Wolfson Foundation - a charity that awards grants to support excellence in the fields of science and medicine, health, education and the arts and humanities.
Chancellor of Durham University, Bill Bryson, is the guest curator of this first exhibition, which covers topics including culture, science, faith and religion, reform and rule, and local history.
The treasures have been drawn from collections across the university.
The Shakespeare First Folio will be on display until 6 March.
A rare folio of Shakespeare's work is being displayed at Durham University.