Frame challenge: WhoWho thinks the upset balance is a bad thing?
Is this something that you are thinking because being too powerful is wrongbadfun? Does everyone else in the party get upset that the balance is screwed, or jealous and are now waiting for their item?
Sometimes people don't really care about balance and being powerful is fun (Been there). Now your party have experienced this taking it away and going back to a more down to earth game might actually cause more problems than it fixes.
So rather than simply working on ways to get rid of this item I think you need to understand the psychology of your party members now they have this item.
It sounds like your one player is certainly loving the feeling of power and you could take your game that way where the challenge level drops and you let your players take on that level of power. Hand out more items, screw the balance and simply enjoy the carnage.
If you are not going to be able to have fun this way then it is still an issue however, because your fun is equally important.
So actually answering the question
Don't do anything to take anything from the players without being certain that it is going to be understood by them.
Tell your players (All of them) that you feel the game is unbalanced, that the only way you can restore balance is to remove this item and get agreement before you proceed.
I suggest talking to them about my frame challenge first, maybe don't offer it as an option, but tell them you understand why it is appealing.
Your options then become:
Switch the item with something less powerful (Just effectively retcon that it has always been that way)
Story line: The weapon becomes weaker the more it is used and the party have to find a way to recharge it. Maybe they get limited charges, maybe that method is evil, maybe it is doomed to fail - but the story is epic and provides replacement loot.
Story line: Someone comes back for the weapon and either steals it, wins the fight and takes it, or explains to the party why they need it and the party hand it over willingly. Either way this can lead onto the next part of their epic adventure tracking the thief or helping the being that they gave it to.
There are many more ways and as this question stays open I am sure you will get some brilliantly inventive suggestions, but if you have not talked to the players and explained yourself you are likely to engender resentment.