"Once we found out it was stolen, we called Homeland Security in Washington," Landau told The Associated Press on Wednesday. "We don't deal in stolen art."
U.S. authorities then handed the painting over to the London-based Art Loss Register, which maintains a 350,000-item database of stolen artworks.
Christopher Marinello, executive director of the Art Loss Register, praised Landau for his actions.
"He was very honorable," Marinello said. "We wish that every dealer were like the Landau Gallery and that they searched before they bought everything."
A spokewoman for the Marlborough Gallery, Janis Gardner Cecil, said the $100,000 painting is now owned by Marlborough's insurer, Lloyd's of London, which will auction it.
Pat Reilly, a spokeswoman for U.S. Immigration and Customs Enforcement in Washington, told the AP that Landau was approached in December 2009 by a man who represented himself as an art dealer at an international art fair in Miami Beach.
The man offered to sell the Klee to Landau, but Landau said he could not evaluate its authenticity on the spot.
The man then sent the painting to Landau in Montreal with the understanding that Landau would buy it if he determined it was authentic.
Instead, Reilly said, Landau discovered the painting had been stolen and turned it over to ICE agents.
Asked if charges were pending against the art dealer who tried to sell the painting, Reilly said only that the investigation is ongoing.
The painting, gouache on paper, shows the figure of a woman surrounded by flowers.
Klee, 1879-1940, was influenced by German Expressionists and by the Cubism of Picasso. He was also part of the Bauhaus school of architecture and design.