A handwritten draft of US singer Bob Dylan's 'Like a Rolling Stone' has sold for $2m at auction in New York, smashing the previous record.

The draft of Dylan's original lyrics for the 1965 epic ‘Like A Rolling Stone,’ which transformed him from a folk musician into a rock icon, had been valued at $1m-$2m by Sotheby's.

Named by Rolling Stone Magazine as the greatest of 500 greatest songs of all time, Sotheby's went so far as to say the lyrics transformed the course of pop music in the 20th century.

"The Holy Grail of rock lyrics has taken its rightful place as the most expensive popular music manuscript sold at auction," said Richard Austin, head of the sale at Sotheby's.

"I am thrilled to see so many collectors recognizing these lyrics' importance as a work of 20th century cultural history."

Mr Austin told AFP ‘Like A Rolling Stone’ was the first six-minute single ever released, allowing people to go beyond short format, and it marked one of the first cases of viral marketing.

Executives opposed its release because of its length, but an employee took it to a nightclub where it played all night, leading DJs to clamour for Columbia records to put it out.

Dylan's final lyrics for protest anthem 'A Hard Rain's A-Gonna Fall' sold for $485,000. A John Lennon guitar went for $305,000, and a peacock jumpsuit worn by Elvis Presley sold for $245,000.

But a piano, first played by John Lennon when he was recording the album ‘Imagine’ and valued at $100,000 to $200,000, did not meet its reserve price and did not sell.

The sale of the lyrics doubled the record price for a rock manuscript at Sotheby's, a title held by Lennon's 'A Day in the Life', which it sold in 2010.

Mr Austin had said that the auction celebrated various rock performers who have gripped the world for the past 60 years.

The memorabilia was compiled from private collectors over the years and some people who worked for the recording industry.