The auction included over 120 guitars and amplifiers used by the British musician to record and perform several of the Dire Straits' biggest hits.
A 1959 vintage Gibson Les Paul Standard sold for £693,000 including auction house commission - a new world auction record for the model, auctioneer Christie's said.
A red Schecter Telecaster-style guitar from 1983, used to record the song "Walk of Life", set another record with a final price of £415,800 after commission.
"It has been heart-warming to witness how much these guitars mean to so many people and I am also pleased that they will continue to give joy to many through the songs recorded over the years with me," Knopfler said in a statement following the auction.
The rocker is donating 25 % of the total hammer price to three charities, the British Red Cross, Tusk and Brave Hearts of the North East, Christie's said.
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Reuters