Developers are likely to jump at the chance of laying their hands on the 5ha site containing a number of buildings of little or no architectural significance that they can happily raze to the ground.
It has been estimated that entrepreneurs may be ready to pay the Ministry of Defence as much as £250 million for the site, which lies between Sloane Square and the Thames.
The announcement accompanies a reprieve for a second historic army base, which had been slated for closure in Woolwich, south-east London.
Following a two-year study, the Ministry of Defence has decide to refurbish Woolwich Station - built between 1776 and 1802 as the home of the Royal Artillery (RA) - rather than close it when the last RA regiment leaves in 2007.
The announcement of the sale was made yesterday by defence secretary John Reid.