The group plans to offload its Platform Solutions unit, which makes electronic components for both the commercial and defence sectors, according to Sunday newspapers.
The move to offload the business, which does not represent a core part of the group, comes as BAE prepares itself for Government cuts to the defence budget.
BAE has already announced plans to axe nearly 1,000 jobs in the UK following changes to the defence programme announced last year.
Last week, it was revealed that 212 workers at the BAE Systems plant in Brough, near Hull, traditionally known as the Home of the Hawk, face redundancy because of a fall in the manufacturing workload, predominantly on the Hawk programme.
The Platform Solutions unit makes electronic components for the commercial and defence sectors, including cockpit displays for fighter jets, digital engine controls for commercial aircraft and electronic components for hybrid buses.
The business is part of BAE's Electronic Intelligence and Support division, which employs around 32,000 staff, including 1,500 in Rochester, Kent.
It generated annual earnings of $202m (130m), before interest, tax, depreciation and amortisation, last year.
The sale is being handled by JP Morgan and Wells Fargo, and potential buyers are thought to include industrial groups such as Rockwell Collins and Woodward Governor, as well as private equity firms, including Warburg Pincus and Carlyle Group.
Other potential suitors are thought to include avionics firm Moog, and its rivals Honeywell and Hamilton Sundstrand.
BAE, which declined to comment, is understood to want to sell the business as a single entity although it may consider breaking it up if it could get a higher price this way.
In February BAE agreed to pay 278m in fines and plead guilty to two charges after a probe into its activities in several countries by the US Department of Justice and the Serious Fraud Office.
The group saw its operating profits for 2009 fall to 982m from 1.72bn the previous year, due to the loss of a key US contract and the fines relating to bribery allegations.
It is steeling itself for belt-tightening in the face of defence budget cuts in the UK and US.