Business Secretary Vince Cable has confirmed that the government will sell Royal Mail through a flotation on the London Stock Exchange.
Mr Cable told MPs that employees would be given 10% of shares for free in the biggest employee share scheme in nearly 30 years.
The sale is likely to value the business at £2bn-£3bn.
Members of the Communication Workers Union (CWU) are overwhelmingly opposed to the privatisation.
Selling shares on the stock market has been chosen over selling off the business to a private operator.
Companies such as TNT and DHL had been suggested as possible buyers.
Speaking on BBC Radio 4′s Today programme, Business Minister Michael Fallon said the time was now right to “free up” Royal Mail and give it access to private capital that would allow it to grow.