Queensland's state government is selling half its stake in Aurizon Holdings - formerly known as QR National - for about $806 million to pay down debt, Treasurer Tim Nicholls said.
The state is selling 200 million shares at $4.03 each. The stock closed at $4.04 on Friday.
Its holding in Aurizon, Australia's biggest transporter of coal by rail, will fall to 8.9 per cent, from 18.2 per cent, when the sale is completed, Mr Nicholls said.
The Queensland government sold off most of the company in 2010 in what was the second-largest float in Australia's history.
Queensland, Australia's most indebted state, is aiming to return its budget to surplus in 2014-15 as Premier Campbell Newman attempts to win back its AAA credit rating.
Aurizon shares have climbed by 58 per cent from their November 2010 listing, compared with an 11 per cent increase by the S&P/ASX 200 Index.
"Now is not a bad time to be raising funds with confidence coming back [and] markets having rallied," said Nader Naeimi, the head of dynamic asset allocation at AMP Capital Investors. "There might not be a better time to do it."
Mr Nicholls said the deal would provide more funds to pay down debt. "While the government will continue to review its residual 8.9 per cent holding in Aurizon, we have no current intention to sell additional shares in the near term," he said.