The famed "Dylan goes electric" guitar is poised for auction, following a dispute about who actually owns Bob Dylan's historic instrument.

The sunburst Fender Stratocaster is the one the folk hero played when he caused a stir with his divisive, three-song electric set at the 1965 Newport Folk Festival, a mecca for fans of the genre. It is considered among the most important instruments in rock history.

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History Detectives host Elyse Luray, left, Dawn Peterson and auctioneer Wes Cowan pose with Bob Dylan's famed guitar. (Tom McNamara/PBS/Associated Press )

The guitar is owned by Dawn Peterson, daughter of a private pilot who flew Dylan and other American musicians around during the 1960s. Her father kept the instrument when Dylan left it behind and failed to respond to messages about where it could be returned. 

Peterson recently reached an undisclosed settlement in a legal dispute with Dylan over who owned the guitar, which was authenticated as part of an episode of the PBS TV show History Detectives.

"I've been talking to Wes Cowan, who appeared on History Detectives," Peterson told Rolling Stone magazine.

"He owns an auction house. He's giving me some contacts, but we'll probably also call Sotheby's and Christie's to determine who is the best going forward."

The show's experts felt the instrument could fetch $500,000 US, but Peterson thinks it could be worth more. The guitar will also be sold with handwritten Dylan lyrics from 1965, which were in the guitar's case.

Though she had initially said she was not planning to sell the famed instrument, as it was connected to her late father, Peterson has since changed her mind.

"I would feel unsafe hanging it on a wall now, after all this went on," she told Rolling Stone.

"I would have to pay to keep it locked up and I want somebody else to enjoy it. I'm hoping it goes to a museum so it can be shared with everybody."