The scripture, a 300-year-old woodcut known as the "Dazangjing," was one of the only three in the country.
It was among more than 20,000 antique books soaked in the accident on November 15.
After drying the book's pages, staff at the palace are now beginning to flatten them out, said Hao, an official with the palace, who declined to give his full name.
"Somewhere between 45,000 and 60,000 pages of the Buddhist scripture were ruined during the accident."
Some of the pages are damaged beyond repair, with writing blurred beyond recognition, palace officials said.
Another 20,000 of the damaged books have been sent to cold storage for mould prevention.
It will take the palace one or two years to fully recover the ruined archives, the officials said.
Temperature and humidity systems at the palace have been repaired.
Reports said the library would thoroughly disinfect and ventilate the archives.
The accident is an example of the poor conditions at some of Beijing's museums, experts said.
One investigation suggested 70 per cent of the capital's museums suffer from problems such as lack of temperature and humidity controls and limited storage space.
The survey, conducted by Beijing Municipal Administration of Cultural Heritage, indicated that only 13 of 37 municipal-level museums have temperature and humidity control systems.
To make the situation worse, only five of the 44 museums at district level have temperature and humidity control systems, the survey found.
Moreover, hundreds of thousands of relics, such as paper, bronze and iron utensils and frescos, stored in the museums are exposed to erosion and damage, said the report.
"It has become an urgent task for the city's museums to improve their situation," said the report.
"If the erosion and damage continues, some of the collections will lose their value as cultural relics."
More input should be pooled to protect the cultural relics because they represent and record the city's history, Mei Ninghua, head of the bureau, told China Daily.
Cultural experts have called for more relevant standards and regulations to ensure the improvement of the situation.
The accident at the Beijing Culture Palace of Nationalities happened at 10 am on November 15 when a hot water pipe broke, flooding the library and museum underneath the palace's theatre.
Damage to electrical and stage equipment forced all performances scheduled over the following 20 days to be cancelled, sources with the palace said.
By 8 pm, the leak had been stopped and the heating system repaired.
The palace is in the Xidan downtown area of Beijing's Xicheng District and includes an exhibition hall, a library and an opera theatre.