Taylor eclipsed the price paid for his national teammates Daniel Vettori and Brendon McCullum as the Rajasthan Royals snapped him up for exactly $US1 million ($NZ1.32 million) for two seasons in the Twenty20 competition.
It was among the highest prices achieved for a non-Indian player while Vettori was purchased by Taylor's old side, the Bangalore Royal Challengers, for $US550,000 and McCullum by the new Kochi franchise for $US475,000.
World cricket's leading lights were up for grabs and the 10 mega-rich franchises didn't disappoint as they gathered at a luxury hotel in Bangalore, showing a particular liking for Indian stars.
The Kolkata Knight Riders snapped up opener Gautam Gambhir for $US2.4 million and allrounder Yusuf Pathan for $2.1 million, both players seemingly benefiting from their recent form shown in one-day internationals against New Zealand.
The Indians eclipsed the tournament record price of England duo of Kevin Pietersen and Andrew Flintoff, who went for $US1.55 million each in 2009.
Former West Indies captain Brian Lara and a host of England's Ashes heroes were also among 353 players up for grabs at the two-day auction in Bangalore.
It was the "marquee" players first up and Taylor's auction was among the more frenetic, with five teams bidding for his services.
The hard-hitting New Zealand vice captain, who will play alongside Shane Warne, was unavailable for comment tonight as New Zealand are in the midst of the first test against Pakistan in Hamilton.
New Zealand manager Dave Currie said the topic would be off limits.
"We're in the middle of a test match and we're focusing on that. There won't be any comment on (the IPL) for the next three days," Currie said.
Rajasthan partner Shilpa Shetty, a famous Indian actress, said Taylor "was a really good buy for today and it is going to plan" midway through the auction.
Also among the bidders today was former New Zealand captain Stephen Fleming, coach of the defending champion Chennai Super Kings.
Some top cricketers have opted out of the IPL's fourth season, including the Australian trio of Ricky Ponting, Michael Clarke and Mitchell Johnson, and former India captain Anil Kumble.
Pakistan's cricketers will continue to miss out on the IPL bonanza after none of them was included for the auction.
The two-day auction was to finish tomorrow night.
The IPL has bounced back from its drop in fortunes last year after allegations of massive corruption, money-laundering and tax evasion, as well as secret deals to hide teams' real owners, and even links to India's criminal underworld.
IPL founder Lalit Modi - whose brash style personified the event - was thrown out by the BCCI, the sport's governing body in India, over accusations about his conduct and organisers hope this year's tournament from April 8 to May 22 will be fresh start.
