The novice author signed the copy to the woman, known only as Neera, and dated it July, 27 1997 – exactly a month after its original publication.
Neera and Rowling met in Edinburgh where their daughters, Jessica and Nastassia, attended the same nursery.
They built up a friendship that led the author to give her one of only 500 editions of her newly-printed book.
Her hand-written message by Rowling inside reads: “For Neera, Donnie, Nastassia and Kai with lots of love from Jo’.
The book also contains a printing error that was corrected in later print runs.
On page 53 there is a duplication of ‘1 wand’ on a shopping list.
The copyright on the inside cover is also credited to ‘Joanne Rowling’ which was later changed to J.K Rowling.
Twenty years on and the book is being sold on behalf of Neera.
It is expected to sell for £40,000 at Bonhams auctioneers, London, thanks to it’s unique inscriptions.
It could break the world record price paid for a first edition Harry Potter book which stands at £43,750.
Luke Batterham, of Bonhams’ book department, said: “We don’t really know much about Neera other than the fact she was a parent at the same nursery.
“What we do know is that it’s incredibly rare to find one of these first edition books in such good condition.
“In later years, as the books got more and more popular, and she did more and more for charity, she signed thousands of books meaning they’re now not worth anywhere near as much, but to find a first edition from 1997 with this kind of inscription is quite unusual.”
With the story of the boy wizard turning 20 this year, the market for Harry Potter collectables is larger than ever, a factor which has lead Neera to choose to cash in now. Mr Batterham said: “The book is being sold on behalf of Neera.
“I think, with it being 20 years since the it’s release, the idea of holding on to a book of such high value suddenly became too much.
“The book really is in such wonderful condition and, with it being inscribed, the number of books like it on the market is very, very few.
“It’s quite nerve-wracking having it really.”
The book is being sold on November 15.