Sotheby's Tobias Meyer called the price "a major accomplishment."
It is the highest price paid at auction for a work by a living artist and bypasses the record formerly held by Francis Bacon's work.
The 9-foot-by-9-foot oil painting was originally commissioned by Siemens Elettrato cheer up workers in its Milan offices in the late 1960s and depicts Milan's Piazza del Duomo, also known as Cathedral Square.
The photo-painting technique is widely considered a "masterpiece" and one of the best example's of the German artist's work.
The work was previously bought by the Hyatt hotel group in 1998 where it had hung in Chicago before Tuesday's auction.
It was purchased by a private American collector and Napa Valley vineyard owner Donald Bryant.
According to the Guardian, Bryant reportedly punched his fist in the air after the sale, saying it "just knocks me over."
When asked about the high price, he said "I'm not sure I should be breaking those kinds of records."