A German museum has labelled its works of art based on their likelihood of having been stolen by the Nazis.

The Zeppelin museum, in Friedrichshafen, south Germany, has begun colour coding its exhibits according to a green-yellow-orange-red scale.

No item has yet been given a red label to indicate it had most likely been stolen during the 12-year Nazi era from 1933 to 1945, the Economist reported.

The labelling was introduced as part of one of the museum’s latest exhibitions: “The Obligation of Ownership: An Art Collection Under Scrutiny”.

So far, two exhibits have received an orange label. The rest are marked either green or yellow.

One of paintings with an orange label, Bouquet by Otto Dix, was previously owned by Max Strauss, a Jewish collector who fled Germany in 1933.

It is unclear whether he sold the work under pressure before fleeing, or whether he had sold it earlier.

Many Jewish art collectors in the 1930s either had their works of art confiscated or were forced to sell at extremely low prices. High-ranking Nazis, including Herman Goering, amassed large art collections as a result.

Other works were sold off to help fund the German war effort. The Nazis labelled much modernist art "Entartete Kunst" (“degenerate art”) and destroyed or removed it from exhibitions.

Many items were sold on to museums or art collectors after the war and their former owners remained unclear.

The German Lost Art Foundation has received millions of euros in donations since it was founded three years ago to trace some of these former owners.

The organisation is building a database of items seized during the Nazi years.

Zeppelin museum director Claudia Emmert said it had decided on a more individually proactive approach: "It’s better to do your research, and then it’s you who takes action.”