The watercolor, which was commissioned by Austen's nephew in 1869 to illustrate his biography of the author, sold for £164,500 ($270,454) at auction in London. Sotheby's had forecast it would fetch between £150,000 and £200,000.
Sotheby's described the image of one of Britain's best-known female novelists as "the most famous and instantly recognizable portrait of Jane Austen".
"This is the original watercolor portrait commissioned by the Austen family in 1869, and which has remained in family possession ever since… The portrait, with its secure provenance and certain status, is the most important likeness of Jane Austen ever likely to become available on the open market," said the auction house.
The portrait, by James Andrews of Maidenhead, Berkshire, was commissioned posthumously, over 50 years after Austen's death.
Andrews based his work on a pencil-and-watercolor sketch drawn by the author's sister during her lifetime, which was judged unsatisfactory for inclusion in her first full-length biography.
The Andrews portrait was auctioned at 2:30 p.m. GMT on Tuesday as part of a sale of English books and illustrations.
(Read more: Frieze London: Booming demand for priciest art)
His vision of Austen – whose novels include the classics "Pride and Prejudice", "Sense and Sensibility" and "Emma" – will appear on £10 notes from 2017, the bicentenary of her death.
It followed a campaign earlier this year for a woman to feature on the denomination, as the removal of prison reformer Elizabeth Fry's image from £5 notes left sterling without a female face, bar the Queen.