Mr Osborne has given no timeline for the sale of its holding, which is currently valued at about £1.5 billion.
The privatisation of Royal Mail, which began with a sale of shares in October 2013, has been controversial, having evaded numerous governments, both Labour and Conservative.
The sale eventually went ahead after a charm offensive to win over the trade unions. Employees now own 10% of the shares on the market.
But ministers came in for criticism when institutions made a killing as the shares soared from their 330p flotation price to 600p. They now trade at about 515p.
Mr Osborne told MPs: “I am today announcing that the Government will begin selling the remaining 30% shareholding we have in the Royal Mail.
“It is the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer.”
The sale is part of a plan to raise money and cut spending in order to bring down the public deficit.