"Portrait of Angel Fernandez de Soto", from Picasso's Blue Period, was due to be sold at Christie's in New York on Wednesday.
The auction house has valued it between $40 million and $60 million.
But Julius Schoeps has sued Lloyd Webber's foundation, saying he is an heir of a Jewish banker from Berlin who was forced to sell the painting in 1934 as a "consequence of Nazi persecution", court documents say.
US Judge Jed Rakoff has temporarily halted the sale of the 1903 painting, also known as "The Absinthe Drinker", until the matter has been heard on Tuesday.
Christie's has possession of the painting, which shows an elegantly dressed friend of Picasso's sitting solemnly at a table with a glass in front of him.
Proceeds from its sale are due to benefit unidentified charities.