"Christine", by 20th century master of African modernism Ben Enwonwu, had been in the sitter's family home ever since it was painted in Lagos in 1971.
"The family were unaware of the significance of the painting or the importance of the artist, until a chance "googling" of the signature led them to Sotheby's free Online Estimate Platform," said the London auction house.
The painting fetched over seven times the pre-auction estimate, finally going under the hammer for £1.1 million (1.3 million euros, $1.4 million).
The work precedes the artist's 1974 painting of Ife royal princess Adetutu "Tutu" Ademiluyi, which recently turned up in a London flat after not being seen in decades.
The portrait is a national icon in Nigeria, with Booker Prize-winning novelist Ben Okri telling AFP that it was thought of as "the African Mona Lisa".
Enwonwu, who died in 1994, is considered the father of Nigerian modernism.
He made three paintings of "Tutu", the locations of all of which had been a mystery until the recent discovery.
The works became symbols of peace following the clash of ethnic groups in the Nigerian–Biafran conflict of the late 1960s.