The girl's plate with a balloon appeared on a wall on East Eastern Avenue in Churidich, east London, dating back to 2006.
The British artist, Instagram, published a picture of the shocked audience at the moment of shredding the paper and wrote a comment saying "Here it is lost, lost, lost ...".
Sotheby's said it was "definitely" the first time a work of art had torn itself up after selling it at auction.
Sotheby's is looking into whether or not to cancel the auction in the wake of what happened, as there are those who say that the price of the plate now has risen, and therefore may be resold at auction.
Art experts estimate the price of the painting has risen by at least 50 percent as it has been torn apart. It may be around £ 2 million.
The artist, who is likely to be the son of the English city of Bristol, is famous for his wall paintings covering the walls of the world .