The family had owned the 9 inches by 7 inches oil-on-wood portable altarpiece, The Baptism of Christ, since the mid-19th Century.
The painting had been kept in an envelope and the family had not known what it possessed, the BBC reported.
The Christie's valuation center said the painting was a "wonderful, vibrant work" and came as a "complete surprise". It will be sold Dec. 8 by Christie's in London.
El Greco, born in Crete, had a unique style which inspired painters like Cezanne, Picasso and Jackson Pollock.
The Baptism of Christ measures 23.7cm by 18cm and was found when a man living in a small apartment in western Spain responded to an advertisement offering art valuations, Christie's said.
The auction house said the painting dates from El Greco's time in Venice, from 1567-70, and is an extremely rare example of his work from that period.