The near life size, full length image of the supermodel reclining on a bed, was sold for £3,928,000, (€5.7m) to an anonymous phone bidder after a furious battle between buyers in Christie's London sale room.
However, it was overshadowed by another work by the artist, A Red-Haired Man on a Chair, which fetched £4,152,000 (€6m) the highest price yet paid for work by Freud.
Catherine Manson, Christie's spokeswoman, said after the Post-War Contemporary Art Sale: "We are delighted with the results of the sale of the two works by Freud, painted exactly 40 years apart. They are stunning and highly sought after."
The sales room was packed with more than 600 art enthusiasts and many were forced to stand in the aisles and in the doorways, and watch the bidding unfold via television screens in an adjoining room.
Jussi Pylkkanen, president of Christie's Europe and international director of 19th and 20th century art, was the auctioneer during the evening as the anonymous phone bidders vied to buy the Moss painting.
With the exception of the Queen, the model is probably the most famous figure to be painted by Freud, widely regarded as Britain's greatest living artist.
The 82-year-old grandson of psychiatrist Sigmund Freud prefers to paint sitters he knows well.
Models are often too "hardened", he says. "They've grown another skin because they've been looked at so much."
Moss, 31, whose daughter, Lila Grace, is now two-years-old, suggested the portrait in an article in Dazed and Confused magazine. It takes between six months and a year of regular sittings for the artist to complete a painting, but Moss, on-off girlfriend of troubled singer Pete Doherty, was unconcerned.
Normally waif-like, the supermodel is given an imposing physical presence by Freud and her face, normally the dominant force of any photograph of her, is overshadowed.
Meanwhile, Freud's picture of the red man on a chair was bought by another anonymous phone bidder and beats the previous record price paid for one of the artist's pictures Large Interior, W11, which sold for over £3.5m (€5m) in 1998.