The 122-mm Italian shell was discovered by a metal detectorist last week half-buried in the sand under two metres (6.5 feet)of water.
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"I thought it was a rock," the diver, Laurent Lombard, told the Nice-Matin newspaper. "I picked it up..."
The beach was immediately closed and residents within a 100-metre radius were evacuated.
A first attempt to defuse the bomb last Friday proved unsuccessful given its location and age.
The beach was reopened at around 10 am (0800 GMT) on Thursday to both tourists and shorefront shop owners.
Palm Beach is located nearly two kilometres away from La Croisette, the most famous Cannes beach which is the backdrop to the Cannes Film Festival each May.
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