Kim Kyong-hui is the daughter of North Korea's founder, Kim Il-sung, and sister to former leader Kim Jong-il.
She had not been seen since her husband, Chang Song-thaek, was executed by her nephew for "acts of treachery".
But on Sunday, state media released a photo of her enjoying new year celebrations.
The photo, released by North Korea's state news agency KCNA, showed Kim Kyong-hui seated next to Kim Jong-un and his wife in a crowded theatre in Pyongyang. She was also included in the list of top-ranking officials in attendance.
Oliver Hotham, editor at NK News, which covers events in the reclusive nation, said the reappearance was a surprise.
"Many North Korea watchers had assumed that Kim Kyong-hui had gone into exile or even been killed in the wake of her husband's death," he told Reuters.
Her appearance seated next to the leader suggested she had retained - or regained - significant influence, he added - possibly as an advisor.
"It's also a reminder of how weird and brutal North Korea is, after all she's sitting next to the man who ordered her husband's execution."
Kim Kyong-hui and her husband Chang Song-thaek were major players within the North Korean state at the time of their nephew's ascension to power nearly a decade ago.
Mr Kim succeeded his father as leader in 2011, and it was widely believed that Mr Chang was one of his mentors during the transition.
But two years into the new leader's rule, Mr Chang was removed from a meeting by armed guards in dramatic fashion. Official statements claimed he had confessed to plotting to overthrow the state, and that he had been immediately executed.
Many observers of the North Korean state believe he may have been considered a threat to the young leader, and killed as part of a purge.
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