The buyer, London art agent Hazlitt, Gooden and Fox, now has one of only seven copies of "The Tales of Beedle the Bard," which is leather bound with silver mounts.
The book originally had been expected to sell for about $100,000. The standing-room-only crowd at Sotheby's auction house applauded as bidding topped the 1 million pound ($2 million) mark.
The money will benefit The Children's Voice, a charity co-founded in 2005 by Rowling and Baroness Nicholson, a member of Britain's House of Lords.
Rowling, 42, watched the auction on the Web from her home in Edinburgh, Scotland, and said she was ecstatic.
"This will mean so much to children in desperate need of help," she said in a statement. "It means Christmas has come early to me."
Rowling, whose Harry Potter books have sold nearly 400 million copies and been translated into 64 languages, wrote the Beedle tales after finishing the seventh and final work in the Potter series.
"'The Tales of Beedle the Bard' is really a distillation of the themes found in the Harry Potter books, and writing it has been the most wonderful way to say goodbye to a world I have loved and lived in for 17 years," Rowling said.
She said the six other copies of the Beedle books have been given to people who were closely connected to the Harry Potter collection.http://money.cnn.com