The rock legend torched his 1965 Fender Stratocaster at the end of a show at the Astoria in Finsbury Park, north London, in March 1967.
The stunt sent roadies rushing to put out the flames and left Hendrix needing treatment for minor burns.
But amid the hubbub, press officer Tony Garland cleared away the scorched Stratocaster and stored it in his parents garage in Hove, East Sussex, where it lay forgotten for nearly 40 years.
Even as Hendrix became famous for burning his guitars on stage the instrument remained undiscovered until last year when it was unearthed by Garland’s nephew.
The guitar was bought for just over the estimated price at the Fame Bureau’s It’s More Than Rock And Roll auction at the Idea Generation Gallery in east London, the guitar was snapped up for just over the estimated price.
American collector Daniel Boucher who bought piece of rock history, said: “I thought I’d have to pay a little bit more for it, actually. I am going to play it, I hope some of it rubs off on me.
“It changed music, he raised the bar so high you couldn’t get over it. Obviously it is an investment, it couldn’t not be an investment for that amount of money, but I bought it because I like it.”
Also sold in the auction was the last notebook of the Doors’ Jim Morrison featuring poetry, partial lyrics and Morrison’s thoughts in his last months before he died which fetched £58,000.
The first contract between The Beatles and their manager Brian Epstein, dubbed the most important music contract of all time, was also sold for £240,000.