Decorated with seashells and colored marble, the vaulted sanctuary lies buried 52 feet inside the Palatine hill, the palatial center of power in imperial Rome, archaeologists said at a news conference.
Over the past two years experts have been probing the space using endoscopes and laser scanners, fearing that the fragile grotto, already partially caved-in, would not survive a full-scale dig, said Giorgio Croci, an engineer who worked on the site.
The archaeologists are convinced that they have found the place of worship where Romans believed a she-wolf suckled Romulus and Remus, the twin sons of the god of war Mars abandoned in a basket and left adrift on the River Tiber.
Thanks to the wolf, a symbol of Rome to this day, the twins survived and Romulus founded the city, becoming its first king after killing Remus in a power struggle.
Ancient texts say the grotto known as the "Lupercale"- from "lupa," Latin for she-wolf - was near the palace of Rome's first emperor Augustus, who was said to have restored it, and was decorated with a white eagle.
That symbol of the Roman Empire was found atop the sanctuary's vault, which lies just below the ruins of the palace built by Augustus, said Irene Iacopi, the archaeologist in charge of the Palatine and the nearby Roman Forum.
Augustus, who ruled from the late 1st century B.C. to his death in the year 14, was keen on being close to the places of Rome's mythical foundation and used the city's religious traditions to bolster his hold on power, Iacopi said.
"The Lupercale must have had an important role in Augustus' policies," she told reporters. "He saw himself as a new Romulus."
Andrea Carandini, a professor of archaeology at Rome's La Sapienza University and an expert on the Palatine, said the grotto is almost certainly the "Lupercale."
"The chances that it's not are minimal," said Carandini, who did not take part in the dig. "It's one of the greatest discoveries ever made."
Most of the sanctuary is filled with earth, but laser scans allowed experts to estimate that the circular structure has a height of 26 feet and a diameter of 24 feet, said Croci.
Archaeologists at the news conference were divided on how to gain access to the "Lupercale."
Iacopi said a new dig would start soon to find the grotto's original entrance at the bottom of the hill. Carandini suggested enlarging the hole at the top through which probes have been lowered so far, saying that burrowing at the base of the hill could disturb the foundations of other ruins.
The Palatine is honeycombed with palaces and other ancient monuments, from the 8th-century B.C. remains of Rome's first fledgling huts to a medieval fortress and Renaissance villas. But the remains are fragile and plagued by collapses, leaving more than half of the hill, including Augustus' palace, closed to the public.
Culture Minister Francesco Rutelli said the first area to benefit from extensive restoration will be Augustus' palace, scheduled to reopen in February after being closed for decades.