Self-dual gravity may be reformulated as the two dimensional principal
chiral model with the group of area preserving diffeomorphisms as its
gauge group. Using this formulation, it is shown that self-dual gravi
ty contains an infinite dimensional hidden symmetry whose generators f
orm the Affine (Kac-Moody) algebra associated with the Lie algebra of
area preserving diffeomorphisms. This result provides an observable al
gebra and a solution generating technique for self-dual gravity. (C) 1
995 American Institute of Physics.