Given to him by his wife Joanne Woodward and lovingly inscribed while the couple filmed and co-starred in the 1969 movie "Winning," Newman was photographed wearing the iconic stainless steel watch on countless occasions.
Auction house Phillips said it was snapped up late Thursday in New York by an anonymous telephone buyer for $17.8 million after 12 minutes of frenzied bidding in a sale that attracted collectors from more than 40 countries.
But if it's the most expensive wristwatch sold at auction, a handcrafted Patek Philippe pocket watch made for New York banker Henry Graves remains the most expensive overall, fetching more than $24 million at Sotheby's in 2014.
Before giving her husband the watch, Woodward had the words "Drive Carefully Me" engraved on the back, in a nod to her anxiety over his fast driving three years after he was injured in a 1965 motorcycle accident.
It was on the set of "Winning," when Newman played an IndyCar driver, that the actor developed a life-long love of auto racing.
He used the watch, known as the Paul Newman Daytona, to time races and bet with friends that his watch was more accurate than theirs, Phillips said.
But that summer he gave the watch to his daughter Nell's then boyfriend, James Cox. The couple dated for nearly a decade after first meeting in college.
Newman gifted the watch when he discovered that Cox -- who was helping build a treehouse at the actor's property in Westport, Connecticut -- did not own one.
"Pop handed James his Rolex and said, 'If you can remember to wind this each day, it tells pretty good time,'" wrote Nell in a signed letter accompanying the sale.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)