Angie Powell, 57, and her husband Rhodri, 56, uncovered the 20ft wide, six ft high, wall painting as they peeled back wallpaper and mortar from their grade II listed home.
The priceless picture, which shows the monarch sitting on his throne wearing his crown and holding a sceptre, is thought to have been painted shortly after the house was built at the turn of the 15th century.
At the time it was the home of Thomas Cranmer, the Archdeacon of Taunton who went onto become the Archbishop of Canterbury and helped Henry break from the Catholic Church and set up the Church of England.
Though the artist is unknown, it is thought to be unique.
The only other known mural of the King, painted in the Palace of Whitehall, was destroyed when it burned down in the 16th century.
Michael Liversidge, former head of history of art department at Bristol University, said the discovery was "totally fascinating" and of "enormous importance and significance".
"It would have been an expression of loyalty," he said.
"Cranmer could have done it as a tribute to Henry and that would make it an object of great importance and significance. It is a unique image."