The four-inch dagger was kept inside a glass casket, which was yesterday found broken and the dagger missing, following which security officials called up police.
A thorough search of the museum at Teen Murti Bhawan in New Delhi was conducted and CCTV footage was checked.
Police have registered a case of theft.
During investigation it emerged that the casket was outside the range of any of the CCTV cameras installed in the premises.
Police suspect the hand of an insider in the theft, the official said.
Investigation is underway, the official added.