According to the scientists who made the discovery in the Paracas Reserve on the eastern coastline of Peru, the five foot tall prehistoric beast -- named the Water King -- was twice the size of modern penguins and covered with red and brown feathers.
They believe that the flightless bird, unlike its modern day descendants, lived in the tropics where it dived into warm seas using a seven-inch long spear-like beak to hunt for fish, the 'Daily Mail' reported.
It is believed that the bird lived at a time half way between the end of the dinosaurs and the modern day when the Earth was much warmer than now and when when gigantic prehistoric birds and mammals roamed the world.
Dr Dan Ksepka of North Carolina State University, said: "We recovered feathers still attached to the wing, as well as some smaller body contour feathers, which in modern-day penguins serve to waterproof them and regulate their body temperature.
"In terms of size, these feathers are really no larger than the ones you would find on a 'normal-sized' penguin; in fact, some small modern penguins' feathers are longer than the ones on this animal."
The researchers worked out the colour of the giant penguin by looking the fossilised feather's melanosomes -- tiny pigment carrying structures in cells that give colour to hair and feathers.
Unlike modern penguins, which are predominantly black and white, the Water King was a softer grey or reddish brown colour, shades normally found in baby penguins. "Some of the feathers we found were loose, so we can't totally 'colour in all the lines' on the penguin yet, or tell which feathers may have been part of a brighter display pattern on the bird, like the eye and neck bands on some modern species of penguin," said Dr Ksepka.
"But features of the bones tell us that this particular fossil was a fully-grown adult, not a juvenile, so finding brown and grey colours was a surprise." The fossil shows that the flipper and feather shapes that make penguins such good swimmers evolved early in the bird's history - but that the black and white colours are a more recent development.
The 36-million year old fossil, discovered in Peru and nicknamed Pedro, has been named Inkayacu paracasensis -- the Water King.
The bird's fossilised feathers, left, and an artist's impression of the penguin diving. It would have dwarfed its black and white relatives today, standing at five foot tall - nearly twice the height of the Emperor penguin.
It's wing feathers were densely packed and stacked on top of each other to form stiff, narrow flippers. Its body feathers had broad shafts that helped the bird swim, the scientists reported in the journal Science.
All the giant penguins that once roamed the prehistoric earth died out, leaving behind the smaller varieties which are today found only on the Antarctic. "Before this fossil, we had no evidence about the feathers, colours and flipper shapes of ancient penguins. We had questions and this was our first chance to start answering them," said Dr Julia Clarke, palaeontologist at the University of Texas at Austin and lead author of the report.
The largest living penguin is the Emperor - which stands around four foot high.