The female figure, known as Ngonnso', will be returned to the kingdom of Nso' in northwestern Cameroon. It was taken by colonial officer Kurt von Pavel and donated to Berlin's Ethnological Museum in 1903.
"Bring Back Ngonnso," a civil society initiative, has been campaigning for the statue's return for years, as the Nso people say they have suffered numerous calamities since the statue was stolen.
"The Ngonnso' has a central role for the Nso', as she is considered a mother deity," the foundation said in a statement.
It added the artefact was not removed by war looting from Kumbo, the capital of the Nso kingdom. However, Pavel was accompanied by armed soldiers in Cameroon, which would have intimidated the Nso', the foundation said.
The foundation also announced that it will return 23 pieces to Namibia and is planning an agreement to repatriate objects to Tanzania.
Germany, which lost all its colonial territories after World War One, was the third-biggest colonial power after Britain and France. However, its colonial past was ignored for decades while historians and politicians focused on the legacy of Nazi crimes, including the Holocaust.
Mbinglo Gilles Yumo Nyuydzewira, an Nso kingdom prince, said the news was received warmly in Cameroon.
"After more than 120 years, we can only remain happy for it is a moment to commemorate and come closer to our ancestral links with love and togetherness," Yumo Nyuydzewira told Reuters.
"The message remains that of reuniting spiritually and ancestral wise with the mother and founder of this great dynasty," Yumo Nyuydzewira said.
Foundation President Hermann Parzinger said that objects do not need to have been taken in an unjust context, like looting, for them to deserve repatriation.
"The special – especially spiritual – significance of an object for the society of origin can also justify a return," Parzinger added.
Last year, Germany announced its intention to return Benin Bronzes to Nigeria and apologized for its role in the slaughter of Herero and Nama tribespeople in Namibia more than a century ago.