Portrait Of Angel Fernandez De Soto (The Absinthe Drinker), dated 1903, is expected to fetch 30-40 million pounds ($50-83 million), the highest pre-sale estimate for any work of art ever offered at auction in Europe.
The June 23 auction follows a February sale at rival Sotheby's where a Giacometti sculpture went under the hammer for $US104.3 million, just beating the previous record for another Picasso that sold for $US104.2 million in New York in 2004.
Wednesday's announcement of the June sale underlines growing confidence in the art market after a sharp contraction during the global financial crisis.
The Picasso - featuring a seated man with a glass of absinthe and a pipe, the smoke curling upwards - is being offered by composer Andrew Lloyd Webber.
The proceeds from the auction will go to Webber's foundation which promotes arts and culture in Britain.
The same work was originally offered for auction at Christie's in November 2006, but it was withdrawn at the 11th hour after an individual challenged its true ownership and said it was effectively stolen from his family by the Nazis.
"This challenge has since been resolved by agreement and the claimants have withdrawn all claims to the painting, leaving the foundation free to sell the work," Christie's said in a statement.
Jussi Pylkkanen, president of Christie's Europe, Russia and the Middle East, says the painting could end up in a major museum or private collection and anticipates that interest from collectors will be "huge".
"This is one of the most important works of art to be offered at auction in decades," he said.
Christie's says it is "the very embodiment of Blue Period aesthetic, rendered in bold, loose, swirling brush strokes that recall El Greco and trumpet Picasso's virtuosity."
The Andrew Lloyd Webber Foundation acquired the painting at auction in New York in 1995 for $US29.2 million.