Around 150,000 of its UK-based employees will receive shares in the newly-listed company. Employees will also be able to apply for additional shares under an employee priority offer, with a minimum application of £500.
Members of the public will be able to apply for a minimum of £750-worth of shares.
A ballot for industrial action by the Communications Workers Union (CWU) will be launched next week. Union officials are expected to give formal notice of their plans for a vote later today.
CWU said the plans to sell are "a betrayal" of the British public. CWU general secretary Billy Hayes said the move would be "bad for customers, bad for staff and bad for the industry".
"Privatisation would put jobs and services at risk and lead to higher prices for customers. We've seen it happen time and time again in other industries," said Hayes.
The Government announced that contingency plans are in place if strike action is confirmed.
"Negotiations between Royal Mail and the CWU are continuing and Royal Mail remains committed to reaching an agreement with the CWU and averting industrial action," a Government statement said
"However, there can be no guarantee that negotiations will lead to a successful outcome or the aversion of industrial action."
An important day
Business secretary, Vince Cable, said: "This is an important day for the Royal Mail, its employees and its customers.
"Government is taking action to secure a healthy future for the company. These measures will help ensure the long-term sustainability of the six days a week, one-price-goes-anywhere universal postal service."
The move to privatisation was attacked by Labour's shadow business secretary, Chuka Umunna, who said the sell-off was "politically motivated".
"Ministers are pushing ahead with this politically-motivated fire-sale of Royal Mail to fill the hole left by George Osborne's failed plan," he said.
