The company said it will also sell similar stake in Tata Motors to its promoter firm Tata Sons for an amount not exceeding Rs 1,250 crore as part of portfolio restructuring.
"The company as part of its portfolio restructuring on September 18, 2015 sold 3,85,20,801 shares of Tata Motors to institutional investors over the stock exchange for a total consideration of Rs 1,250.69 crore," Tata Steel said in a BSE filing.
Earlier in the day, the company said it will sell shares of face value of Rs 2 each of Tata Motors to institutional investors over the stock exchange for a value not exceeding Rs 1,250 crore.
According to BSE data, Tata Steel held a 5.54 per cent stake in Tata Motors as on June 30, 2015.
Last month, Tata Steel had sold 2.18 per cent of its stake in another Tata group firm Titan to Tata Sons for over Rs 637 crore.
The stock of Tata Steel was trading at Rs 232.80, up 1.13 per cent, on BSE.