Estimated at £30,000-50,000, Bathers on the Lido, Venice saw bidding from the UK, Europe, America and Russia before selling to a buyer in the room at £440,000.
The auctioneers said the buyer was "an international art collector".
The 3ft 1in x 4ft 8in (93cm x 1.43m) oil on canvas came from the deceased estate of a private collector and had last appeared on the open market at Sotheby's in June 1975 where it sold for £4500.
It dated from c.1910-12 when the Russian artist (who was also a set and costume designer with the Ballets Russes) spent his summers in Venice with the great choreographer and impresario Sergei Diaghilev and the famous dancer Vaslav Nijinsky, both of whom are believed to be depicted here - the dark-haired central figure in white and the figure in black swimming trunks respectively.
London Exhibition
Although unsigned, the picture had a label for the collection of Madame Barsacq of Paris, an heir of Léon Bakst.
It was, in fact, one of four paintings produced by the artist in Venice which were shown at The Fine Art Society in London in 1912, the first time Bakst's works were exhibited in England.
Two of these works have the same title as the current picture, while the other was a full-length study entitled Nijinsky on the beach at the Lido.
When the hammer finally came down after a tense bidding battle there was a round of applause in the saleroom. The price exceeded the £105,000 seen at Rosebery's for an English delft portrait charger of Charles II which sold in December 2011 and was the previous house record.
The buyer's premium was 20%.
