The work, now called "Love is in the Bin," will be shown for the first time since it was created in a theatrical stunt at Sotheby's in London in October.
"Since the birth of conceptual art, there have always been artistic attempts to volatilize or even destroy an artwork's own existence, thus undermining its material value or trying to transfer it into a different value context," the Frieder Burda museum said, announcing the show.
Moments after the painting "Girl with Balloon" sold for US$1.4 million — a joint record for the maverick artist — it unexpectedly passed through a shredder hidden in the frame.
The buyer went through with the purchase, and some art experts said it was probably now worth more than it had been before the stunt.
After the auction last year, Banksy revealed via an Instagram post that he had years before intentionally installed a shredder into the frame on the chance his painting would enter an auctioning ring. Analysts interpreted the stunt as a criticism of the art world and market demand.