I had to search my memory for a bit there, but it finally came to me.
It may (or may not) be what was called a "froe", and was used to make shakes
(wood shingles) for a roof. It was held as you are holding it in the picture with
one hand and struck with a mallet down into a short length of log, carefully
following the grain, and trying to make even and uniform shakes for a pioneer's
cabin roof. As you might imagine, the original would have been longer than what
you have, but if we have guessed correctly, I'd say you have a pretty neat find.