The plaque has been put up on the wall of Clinton Cards in Nottingham Street, the site of the former Bell Hotel, where the comedy legend used to enjoy a drink.
It was initially put up outside the entrance to the King Edward VII Upper School in Burton Road but went missing when the school closed in 2011 and the site was redeveloped.
In a farce which would not have been out of place in an episode of Monty Python, a search was mounted for the missing plaque with growing concern that it had been stolen.
But it eventually turned up safely in a storage cupboard and the Edwardians, an association of former students, decided it should be put up again in a more prominent position.
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John Bailey, a close friend of Chapman when the star attended the school between 1953 and 1959, said: “This really is the best place for it to go.
“Some people will know who he was but others might see the name, think ‘who’s Graham Chapman?’ and then look it up and see that he was from Melton.”
John and fellow Edwardians member Ifan Griffiths both used to drink with Chapman in the Bell Hotel, sometimes after school or at the weekends.
John added: “In class, he used to do things and get us in trouble for it.
“When we first started seeing him on the telly it was very strange at first.
“We had some great times in the Bell and other places in Melton like The George or The Boat.”
Ifan said: “I remember Graham for having a very strong personality as a young man. I think this is a great place for the plaque.”
When the plaque initially went missing, Chapman’s Python co-star Michael Palin appealed through the Melton Times for its return.
Edwardians member Brenda Munton added: “I particularly like the quote on the plaque which reads ‘This is getting far too silly’ because it was getting a bit silly when the plaque got lost. We were worried we would never see it again so it is nice to have it back on display.”
There is also a green plaque, installed by Leicestershire County Council, outside Chapman’s former home in Burton Road.