A bronze statue by Alberto Giacometti also broke the record for most expensive sculpture sold at auction, fetching more than $141 million at the same sale in a packed auction room at Christie's.
The Pablo Picasso oil painting, "The Women of Algiers (Version 0)," sold for $179,365,000 after 11 and a half minutes of furious bidding from telephone buyers at a packed auction room at Christie's.
Applause erupted when the sale was finalized in an atmosphere of feverish excitement, accompanied by laughter and jokes, fetching way over its pre-sale estimate of $140 million.
The previous world record for a painting sold at auction was $142.4 million, set for British painter Francis Bacon's "Three Studies of Lucian Freud," which was sold by Christie's in New York in 2013.
The 1955 painting by Picasso is one of the last major paintings by the Spanish master still in private hands. He painted several versions until he settled on the nearly four-by-five-foot (1.2-by-1.5-meter) canvas.
Just minutes later, the bronze statue by Swiss artist Giacometti called "Man Pointing," which also broke its pre-sale estimate of $130 million.
Christie's senior vice president Loic Gouzer had predicted the two works could set a world record.
"You don't have another chance to get them," he said ahead of the auction.
Swiss sculptor Giacometti also held the previous record for the most expensive sculpture sold at auction with his "Walking Man I" fetching $104.3 million in London in 2010.
In total, Christie's sold more than $705 million worth of art at its 35-lot auction of masterpieces spanning more than a century from 1902 to 2011, and scored at its swanky New York premises at Rockefeller Plaza.
Picasso's "Buste de femme" oil painting sold for $67.365 million, a painting from Claude Monet's "The House of Parliament" series went for $40.485 million and Mark Rothko's 1958 "No 36, Black Stripe" fetched $40.485 million.
'Sale of the century'
The proceeds from public art auctions rose 26 percent from $12.05 billion in 2013 to $15.2 billion in 2014, and grew 422 percent between 2000 and 2014, according to Artprice, a leader in art market information.
Artprice CEO Thierry Ehrmann had predicted that interest would be particularly strong for the Giacometti statue, although his prediction that it would eclipse the Picasso did not materialize.
"This will be the sale of the century," Ehrmann told AFP earlier. "It's a tipping point in the history of art."
There are only six casts in the world of "Man Pointing," which shows a wiry, nearly six-foot (1.8-meter) man holding up one hand and pointing with the other.
New York's spring auction season began last week at Sotheby's, which sold a Vincent van Gogh painting for more than $66 million, the most paid for a work by the Dutch post-impressionist since 1998.
Van Gogh's "Les Alyscamps," which depicts a stand of autumnal trees, had been expected to go for around $40 million but was finally snapped up by an Asian collector after an intense bidding war.
The sales continue on Tuesday, Wednesday and Thursday.
Despite setting new auction records, the Picasso and Giacometti are unlikely to eclipse the $300 million reportedly paid privately by Qatar for Paul Gauguin's 1892 painting "When Will You Marry?" in February.
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