The 1937 novel, which made Bilbo Baggins a household name, started out as a children's book and was originally written for Tolkien's children, and might never have come to light but for his friend and student Elaine Griffiths, who loved the novel so much she persuaded the author to publish it.
The auctioneers claim the book "illustrated with many black and white drawings penned by Tolkien himself" sets "a new world record price at auction for an inscribed copy of the book."
The Hobbit established Tolkien's name in literature, and was the prequel to the trilogy The Lord of the Rings, which was screened in 2001- 2003 and grossed almost $3 billion at box offices worldwide.
Also going under the hammer was the first foreign language edition of The Hobbit, translated into Swedish in 1947 and the last known photograph of Tolkien taken by his grandson in 1973, which sold for 1,560 and 864 pounds ($3,120 and $1,730) respectively, considerably higher than the guide price.
Tolkien's most successful book has been translated into 50 languages and sold over 100 million copies worldwide.
According to press reports, a film of The Hobbit is due to be released in 2010.
In 2008, the British author, academic, and philologist, who died in 1973, was ranked sixth by The Times out of the 50 greatest British writers since 1945.
