A Picasso painting donated to the University of Sydney has been sold for $20.7 million at a London auction at Christie's overnight.

The painting "Jeune fille endormie", a 1935 portrait of Pablo Picasso's French mistress Marie-Therese Walter, was the second highest price paid at the auction at £13.5 million ($20.7 million).

Picasso's 'Jeune fille endormie' sold for $20.7 million. Credit:Greg Weight

The 40-centimetre wide artwork, valued between £9 to £12 million, was given to the Australian institution by a US-based anonymous donor on the condition it was sold and the proceeds would go to the University of Sydney to fund scientific research.

"When they gave us this remarkable work our donor said 'this painting is going to change the lives of many people'," Michael Spence, Vice-Chancellor of the University of Sydney, said.