Peru has held discussions in recent years with Yale seeking the return of nearly 5,000 artefacts, including ceramics and human bones that explorer Hiram Bingham dug up during three expeditions in 1911, 1912 and 1914.
"Yale considers the collection university property, given the amount of time it has been there," said Luis Guillermo Lumbreras, Chief of Peru's National Institute of Culture.
"This is something we do not recognise because the pieces were legally granted in a temporary loan. That is the reason it will be necessary to air this in the courts and no longer simply on the level of diplomatic conversations."
Peru's Foreign Ministry was preparing the legal case and would likely present it in Connecticut state court, Mr Lumbreras said.
He said it was not clear when the lawsuit would be filed.
Richard Burger, chairman and director of graduate studies at Yale's Council on Archaeological Studies, did not immediately return telephone messages seeking comment.
On loan
Mr Lumbreras said former President Augusto B. Leguia gave Mr Bingham "permission to temporarily export the objects for scientific ends," with the agreement that the artefacts would be returned after one year. That later was extended by 18 months.
"Theoretically, they should have been returned after January 27,
1916," Mr Lumbreras said. "
For nearly a century Peru did not pursue the matter.
"The 100th anniversary of the scientific anniversary of Machu Picchu is coming. We believe it is time to return the collection," Mr Lumbreras said.
Tom Conroy, a spokesman for the university, said he was still looking into Peru's assertion that the artefacts were only on loan.
David Bingham, grandson of Hiram Bingham, said he never heard of any promise to return the artefacts.
"Yale has taken very good care of the stuff and it probably brought more visitors to Peru than almost any other thing because the exhibits at Yale are so famous," he said.
But Bingham said there's no reason Yale and Peru shouldn't be able compromise.
He said there are enough artefacts to create displays in both places.
"There's enough interest where you could have a permanent exhibit in Peru, on loan from Yale, but there would be somebody who would be responsible for it," he said.
The Incas ruled Peru from the 1430s until the arrival of the Spaniards in 1532, constructing incredible stone-block cities and roads and developing a highly organized society that extended from modern-day Colombia to Chile.
The reconstructed ruins at Machu Picchu, located on a craggy mountaintop above a lush valley about 310 miles southeast of Lima, are Peru's top tourist attraction.
Mr Bingham, the first foreigner to reach Machu Picchu, had multiple theories about Machu Picchu: that it was a religious estate inhabited mostly by women, that it was a last Inca stronghold abandoned as the Spanish invaded or the Incas' city of origin.
Experts now say Bingham was wrong on all counts.
Machu Picchu is instead, a summer estate for royalty.
About 600 people, mostly royalty and their servants, are believed to have lived there during the summer.