Graziella Giraudo, nicknamed the "holy woman" by those who queued up to have her read their fortunes, was found sitting in a locked room, one hand in her lap and the other raised as if in benediction.
Investigators said it was unclear whether she had been dead months or years, but that her body had been treated by someone intent on preserving it.
"It seems impossible for something like this to happen in a community where everyone knows each other. It's like a horror film," mayor Gian Paolo Beretta told Il Messaggero daily.
Close relatives living near the small villa where she was discovered in Borgo San Dalmazzo in Piedmont could not confirm when they had last seen her.
"The body is very clean, as if someone had looked after it. Who and how is unclear," coroner Mario Abrate told the local Quotidiano Piemontese.
Giraudo, who would now be 68, was discovered when the woman she had lived with died.
She had been separated from her husband, who - along with their daughter - told police he had known nothing of her whereabouts, media reports said.
Locals who spoke of Giraudo's talent as a fortune teller - how "even nuns sought out her advice" - said they couldn't remember seeing her after 1995.
"We cannot exclude the possibility that she was venerated" after death, local prosecutor Massimiliano Bolla was quoted as saying in La Stampa.
An investigation has been opened "against unknown persons" in a bid to discover who embalmed Giraudo and whether the body in the "villa of horrors", as it has now been dubbed by the media, could have become a cult attraction for local devotees.
"The lady who lived with the mummy came here to buy a lot of fat. It did seem like a strange request," a local butcher told La Stampa.