The almost 3-minute long video is titled, "Shred the Love, the Director's cut".
The artist's "Girl With Balloon" painting shredded itself after being sold for $1.4 billion by Sotheby's earlier this month.
Depicting a girl reaching towards a bright red heart-shaped balloon, the spray paint and acrylic on canvas Girl With Balloon is one of Banksy's best-known images.
Banksy makes the reveal in a video posted on Wednesday, explaining that in practice runs before the auction, the entire painting was shredded to bits, leaving an empty frame and a pile of scraps. When last we spoke of it, the unknown collector who bought it seconds before it was partially shredded had chose to keep it.
At the end, the video notes: "In rehearsals it worked every time..." as it shows the piece going the whole way through the shredding machine with slips of canvas falling to the floor. Now, an anonymous European collector is a proud owner of Banksy's shreds, which the buyer hopes might cost even more after the partial destruction.
But a new video that the guerilla street artist shared to YouTube on Tuesday suggests the stunt was slightly botched.
A stunned crowd gasped and looked on and the painting was swiftly removed.
His Girl With Balloon was bought for £1.04 million by a European art collector - but nearly as soon as the hammer fell, the canvas was passed through a secret shredder hidden in the large Victorian-style frame, leaving the bottom half in tatters and only a solitary red balloon left on a white background in the frame.
Banksy previously claimed that preparations for the stunt were carried out "a few years ago" in case it was ever put up for auction.
The new half-shredded artwork has been renamed Love Is In The Bin after being granted certification by Pest Control, Banksy's authentication body. Shortly after the hammer falls, someone in attendance presses a button on a remote, an alarm starts ringing out, and the art begins passing down through the hidden shredder in the bottom of the frame, stopping about halfway through.
Sotheby's says the piece is "the first artwork in history to have been created live during an auction".