The work, entitled Bridge number 114, was attributed to "Nat Tate," who was invented by the author William Boyd in 1998, the Guardian newspaper reported.
Boyd's "Nat Tate: An American Artist 1928-1960," came complete with reviews and tributes from celebrities, including David Bowie and Gore Vidal, the paper said.
Vidal remarked at the time that Tate was "an essentially dignified drunk with nothing to say. Unlike most American painters, he was unverbal," the Guardian said.
At a party to launch the book in artist Jeff Koons' studio in New York, Bowie — who was part of the hoax — gave a reading, while other people — who were not — told how they had met Tate, who was said to have killed himself by jumping from the Staten Island ferry.
The painting, actually by Boyd, was bought by an anonymous bidder at the auction, held at Sotheby's in London. It was attributed to Nat Tate in the catalogue.
"I am utterly delighted and overwhelmed with the result of ... (the) sale," Boyd told the Guardian.
The money will go to the Artists' General Benevolent Institution, which was set up by famous artist JMW Turner in 1814.