It's hard to convey, 40 years on, the excitement generated by the 100,000 or so cheering spectators who lined the banks of the River Avon on the morning of July 5, 1970.

And the reason for it all? Brunel's iron hulled, screw propelled masterpiece, the ss Great Britain, was finally arriving home from the Falkland Islands. As the tugs Sea Alert and Falgarth brought the rusting and battered old lady up river – and with another well known tug, John King, standing by to help – confetti and roses rained down from another of Brunel's masterpieces, the Clifton Suspension Bridge.

Bristol actress Kim Hicks, then just 11, recalls: "There were these wonderful crowds on the bridge and then, slowly round a bend in the river appeared this rusty old hulk and you thought 'What's all the fuss about?' As she came under the bridge my mum opened a box and we started to drop rose petals on her. It was really lovely."

At the same time shouts went up, "Keep her, keep here" – a reference to the lukewarm reception that her arrival was getting from a cash strapped council which wanted to close down part of the old City Docks – and with it the grand ship's old birthplace.

"It was just a mass of people" recalls Ivor Boyce who was on board the tug John King. "From Shirehampton – by the Lamplighters Hotel – and of course on the Pill side, it was just a mass of people, eight, ten, 12 deep. And from Sea Mills, by the signal station, and all along the towpaths on both sides there were just thousands of people. When we got up to Hotwells the whole area was choc-o-bloc. There was no traffic moving – it couldn't move in fact – the roads were absolutely packed. It was very, very touching to see so many people – and the noise, the noise on the journey from Avonmouth to Bristol was absolutely amazing. Even the noise (of the tug's engine) was overpowered by the people cheering and cars honking. It was very, very moving."

After a wait of two weeks, and with a high tide flooding in from the river to allow a few feet clearance, the Great Britain was eased over a sill and into the dock from which she had been launched by Prince Albert exactly 127 years before. It was July 19, 1970, and on board, alongside members of the Project Committee, was Prince Philip, an enthusiastic supporter of the ship's return. Thanks to the great skill of Bristol's tug boat men the ss Great Britain was safely home at last. But now an even greater challenge lay ahead – that of raising the funds necessary to restore her to something like her former glory.

The ship's final chapter as a commercial operator had begun when, in February 1886, she had left Penarth for Panama with a cargo of coal. Weeks later, after being battered in a fierce storm while attempting to round the Horn, she put in at the Falkland Islands for repairs. She had lost her fore and main topmasts and some sails and her rigging had been damaged by seawater.

But Brunel's great iron ship – once a marvel of its age – would never again leave those far off islands under her own power. For the next 47 years, from 1886 until 1937, she was owned by the Falkland Island Company and used as a floating hulk to store wool and coal. In that year, and now an old lady of 90, the ship was towed to Sparrow Cove, scuttled in shallow water and left to the mercy of the elements.

But if you thought that Brunel's rusting hulk had been quietly forgotten you'd be wrong. Specialist museums around the world – those that knew the Great Britain's history – had long considered rescuing the unique, iron bound ship. Money, as ever, was the deciding factor. In 1969, 30 years after the wartime incident, UK millionaire Jack Hayward came up with an offer of £150,000 towards the cost of a salvage operation. Things now began moving swiftly and by the autumn of that year the Crown had given permission for the ship's removal from the islands.

In March 1970 a salvage team arrived in Port Stanley to remove the masts, patch her up and then get the rusty hulk strapped onto an enormous pontoon for a difficult 7,400 mile tow back across the South and North Atlantic. Working in extreme isolation, in harsh weather and with limited equipment it didn't prove an easy operation for the young German team.

On April 24 the ship left the Falklands for Montevideo in Uruguay and it was here, on May 6, that the world's media gathered to chart the start of the ship's incredible voyage across the seas. On June 19 a dramatic photo of the ship and her pontoon off the Bay of Biscay appeared in the national press. Excitement mounted as Bristol prepared a big welcome.

Coming back up the Bristol Channel the Great Britain passed Penarth, the very place from which she had set out on her very last voyage in 1886. On June 23, escorted by many smaller vessels, the pontoon and its historic cargo arrived safely off Avonmouth. The major part of the journey was, thankfully, over. A week later she was taken off her pontoon and made ready for the seven short, but perilous, miles up the River Avon and into the City Docks.

"In those days I was captain of the Sea Alert, one of the two tugs that towed her up river to Bristol," recalls Maurice Price, now 70 and living in retirement in Shirehampton. CJ King's tugs manoeuvred her from the Bristol Channel into Avonmouth dock – our job was to take her up river. They patched her up with something, I don't know what, in the dry dock there so that she floated on her own.

"I remember thinking 'What a wreck' – she had a colossal slit down the side of her. In fact she looked as if her back had been broken. As we made ready for the job we discovered that the Great Britain had a pilot on board – which as experienced tugmen we just didn't need. She was a dead ship – she had no engines or even an anchor – so all a pilot could do was tell us what we already knew how to do.

"The Great Britain was solely reliant on us tugs – she had no rudder, no anything – just a lump of metal that had to be manoeuvred into position."

It was impossible to tow the ship directly into the River Avon, says Maurice, because of the cross tide. And so the two tugs – the Sea Alert and the Falgarth – manoeuvred the leaking hulk (she had pumps on board) out through the lock and into the tidal Bristol Channel. The plan was to tow her down towards Portishead and then swing her around so as to approach the river mouth with the rising tide behind her. But the pilot on board the Great Britain, who didn't seem to think that she was being turned fast enough, requested the Sea Alert's captain to put on more power. This caused one of the two tow wires to snap and it took all of Maurice Price's skill to stop the other from going and the grand old lady being lost to the mercy of the tides.

"It was touch and go," said the ex-tugboatman, who surely deserves a medal for his efforts.

"Despite what the pilot had said I knew I had to go gentle. If the other tow wire had snapped then the ship would probably have been a goner, lost – swept up towards Sharpness on the tide without engine, anchor or rudder."

After that narrow escape Maurice utilised his "gentle touch" to take her safely up river.

"Knowing the state of her – that was the worry towing her up to Bristol," he says. "Unlike a normal ship you had to go gentle. The Horseshoe Bend was the main danger, although she came around there lovely. Nice and gentle, you know, because of the tide."

Once safe in the Cumberland Basin a smaller tug, the John King, took over from the Sea Alert.

"But I stayed with her all the way to L Shed, her temporary berth for a couple of weeks, just to make sure everything was OK," says Maurice.

The final leg of the journey – and triumphant welcome home – was broadcast to eight million people by a BBC Chronicle team fronted by Magnus Magnusson. By now virtually the whole world knew about the ss Great Britain and her connections with Bristol and the great Victorian engineer, Brunel.

On July 20, the day after her return, City Docks shipbuilders Charles Hill started £30,000 worth of repairs – for free. And just two days later excited members of the public were allowed on board to view the vessel for the very first time.

"Every person who visits the vessel is making a useful contribution to this exacting and fascinating work," said Prince Philip. His encouragement meant that, in the first two days, £2,200 was taken with 30,000 visits made over the first fortnight. It seemed that everyone wanted to see the grand old lady – and she was soon open seven days a week from 10.30am until 6.30pm.

But would she be able to stay in Bristol without help from the council? Now, 40 years on, and thanks to many dedicated people, Brunel's ground breaking ship has become one of the country's major tourist attractions. It's a wonderful achievement.

"The 40th birthday celebrations, which begin on Saturday, July 17, are all about showcasing the extraordinary events of 1970 and how a small band of dedicated people was able to save this historic steam ship for future generations to know and enjoy," says Rhian Tritton, the ship's Director of Museum and Educational Services. We are truly indebted to their vision and determination in bringing home this national treasure against all the odds."

Highlights of the celebrations, which stretch over the weekend, are "The Incredible Journey " – an exhibition which includes people's memories of the homecoming – an animated documentary re-telling the story of the salvage operation and return plus fun family trails, talks from volunteers and children's workshops. And on Monday, July 19, there will be a re-union tea party for some of the major players involved in the ship's salvage.