The possession, valued at up to 200,000 euros (£164,000), was taken in a burglary at the 55-year-old's Castlehyde home overlooking the river Blackwater in Ireland.
It is believed to have been cut off a stuffed rhino's head which was mounted in a safari room in the palladian mansion in north Cork.
Gardai said the burglary was reported at 6.20pm yesterday.
No one was injured in the break-in and no arrests have been made.
Flatley is understood to have been at home at the time with his wife Niamh and son Michael junior.
Suspicion will fall on a traveller gang which has made a lucrative business out of targeting museums, country estates, auction rooms, galleries and collectors for rhino horn. They can fetch up to 65,000 US dollars (£39,000) a kilo on the black market.
Rhino horn is prized in traditional Asian medicine despite being useless and there is a serious health risk from arsenic used to preserve older specimens.
One gang targeted a special storage unit used by the National Museum of Ireland in Dublin last year and got away with four horns. They had been taken off public display amid concerns of a theft.
International policing agency Europol issued a threat notice about an Irish traveller gang, dubbed the Rathkeale Rovers, it believes is behind a spate of similar robberies across Europe.
They are the prime suspects for the Flatley break-in.
CCTV is being recovered from Flatley's mansion as part of the investigation.
Castlehyde, on the banks of the Blackwater near Fermoy, was bought by Flatley in 1999.
The 18th century castle was the ancestral home of Ireland's first president Douglas Hyde and has been extensively refurbished.
Flatley's website states that it sits on 150 acres of pasture and woodland is worth an estimated 100 million euros.