The painting, which self-shredded the last time it was sold three years ago, reached £18,582,000, or almost 20 times more than its pre-shredded price.
Love is in the Bin was sold in London by auction house Sotheby's on Thursday after a 10-minute bidding war involving nine bidders in the sales room, online and on phone.
“It is almost three years to the day since one of the most ingenious moments of performance art this century made auction history,” said Alex Branczik, chairman of modern and contemporary art at Sotheby's Asia.
“It has been a whirlwind to follow the journey of this now legendary piece and to have it back in our midst, offering it tonight in the very room it was created by the artist.
“Banksy is no stranger to making headlines and this latest chapter in his story has captured imaginations across the world. We can only begin to guess what might come next.”
The painting, originally titled Girl with Balloon, made headlines in 2018 when it partially self-destructed at the end of the auction in which it was sold for £1.1m.
The canvas was passed through a secret shredder hidden inside the large frame, leaving the bottom half in tatters and only a solitary red balloon left on a white background in the frame.
Girl with Balloon, which depicts a small child reaching up towards a heart-shaped red balloon, was originally stencilled on a wall in East London and has been endlessly reproduced, becoming one of Banksy's best-known images.
Love is in the Bin massively outperformed its price estimate of between £4m and £6m.
The seller of the artwork, who placed the £1m winning bid on Girl with Balloon, previously described the shredding of the artwork as “surreal".
He said he became the “accidental but very privileged owner of Love is in the Bin".
In March, Banksy raised more than £16m for health projects by auctioning Game Changer, a hand-painted image showing a young boy playing with superhero dolls.
While Batman and Spider-Man are discarded in a bin, the child clutches a figure of a masked nurse wearing a cape.