Matt Hancock said that an agreement from a suitable buyer for the loss-making news channel was likely to be the “most proportionate and effective remedy” to address concerns over the possible influence of the Murdoch Family Trust over British media.
There would also need to be a commitment to fund the channel for at least ten years.
Separate to the Fox bid for Sky, Disney is also in talks to acquire parts of 21st Century Fox.
Hancock also confirmed he would not be intervening in the rival bid for Sky from Comcast, opening up the possibility of a bidding war for the broadcaster.
In its investigation into the Fox-Sky merger, the CMA found that while there was no evidence that the merged broadcaster would not hold a genuine commitment to broadcasting standards, there were concerns over plurality.
The importance of Sky News to the British media landscape emerged as a significant stumbling block that all sides were keen to address.
In addition to a sell-off, other options included the ring-fencing of Sky News within Fox itself.
Hancock said he now needs to be assured that Sky News would remain financially viable over the long-term and take editorial decisions independently.
Alongside a statutory 15 day consultation, discussions will now begin with all parties to finalise a deal. This would be followed by a further consultation.
Sky welcomed the decision and said its independent directors remain focused on maximising value for Sky shareholders.