A huge volcanic eruption on the site of Mount Teide on the island of Tenerife triggered the tsunami, say the team led by Luis Ignacio González de Vallejo of the Complutense University of Madrid.
That blast gave rise to a tsunami wave of up to 150 metres (492 feet), or nearly the height of the Washington Monument in the US capital.
Research shows the tsunami took place around 160,000 to 170,000 years ago, González de Vallejo told a local Canary Islands radio station recently.
The erupting volcano caused a massive rock avalanche which raced at speeds of up to 200km (320 miles) an hour.
This was enough to set off a giant wave which flooded large parts of Tenerife and other Canary Islands.
But the head scientist on the project isn't worried about something similar happening anytime soon.
"The geological future is another story, and the sites of La Palma and Tenerife, which are the most vertical, will see new landslides within tens of thousands of years," said González de Vallejo.
The Canary Islands are an area of intense seismic activity.
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In October 2011 an underwater volcano erupted off the coast of El Hierro, two days after an earthquake measuring 4.3 on the Richter scale rocked the island.
The most recent major volcanic eruption off the Canary Islands took place in 1971 off Teneguia, La Palma.