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The move follows reports that Ford wanted to reduce its Mazda stake in order to gain more flexibility in operations in China.
Ford had been the top shareholder in the Hiroshima-based automaker since 1979 and at times has owned more than a third of Mazda, but started cutting its stake in 2008 in the wake of the global financial crisis.
In a statement, Mazda said the companies would continue their strategic partnership despite Ford's decision to reduce its stake by around two-thirds to 3.5%.
Ford will drop to Mazda's fourth-biggest shareholder after the sale that is due to be completed by November 25.
The US auto giant will transfer part of its shares in Mazda to several of Mazda's business partners, the statement added, without elaborating.
Japanese media reported earlier this week that as many as 10 firms will purchase Ford's Mazda shares.
"This change in shareholding will not affect Mazda's business direction or financial projections," Japan's fifth-largest automaker said in a statement.
"Ford will remain one of Mazda's largest shareholders with a 3.5% stake, and both companies are committed to continuing our strategic partnership, which spans over 30 years," said Mazda president and chief executive Takashi Yamanouchi.
Based on Thursday's closing prices, Ford's sale could be worth a total of ¥31bn ($372m), although the transaction price could be different.
Lewis Booth, Ford's executive vice president and chief financial officer, said in a recent interview with the Wall Street Journal that Ford wanted to dissolve its three-way venture in China with Mazda and Chongqing Changan Automobile Co.
Mazda and Ford would instead have separate tie-ups with the Chinese company.
After purchasing 25% of Mazda's outstanding shares in 1979, Ford raised the stake to 33.4% in 1996 to gain management control over the struggling Japanese company.
Ahead of Thursday's announcement, Ford had reduced its stake to 11% due to its need to raise badly needed cash during the recession and due to Mazda's issuance of new shares.
Many US and Japanese automakers that started alliances in the 1970s have since seen those relationships unwind.
General Motors, faced with heavy losses, has sold its stakes in Japanese truck maker Isuzu Motors, car maker Suzuki and Fuji Heavy Industries, maker of the Subaru. Suzuki is now allied with Volkswagen of Germany.
Toyota Motor has closed a plant in California that it jointly owned with GM.
