The 57-year-old will get rid of 3.2 million shares which - if sold at current prices - would mean a $2.5bn (£1.58bn) windfall.
The plan was revealed in a stock trading plan filed with the US Securities and Exchange Commission.
It allows Schmidt, who was also Google's CEO until 2011, to spread the sale over one year to reduce the effect on its share price.
The documents reveal that he owns "approximately 7.6 million shares of Class A and Class B common stock" - a 2.3% overall stake in the company.
After the sale Schmidt would still be left with stock worth another $3.5bn (£2.2bn).
A Google spokeswoman would not comment on the sale, but Schmidt has been gradually reducing his stake in recent times.
In February 2012, he filed another one-year plan to offload another 2.4 million shares.
Schmidt is currently ranked 138 on the Forbes list of global billionaires with a net worth of $7.5bn (£4.75bn)
He passed the reins of the world's biggest search provider to Larry Page in April 2011.
Page and his co-founder, Sergey Brin, are the only people who own more of Google than Schmidt, each having about an 8.5% share.
There is speculation that the sale could be part of a move by Schmidt to 'diversify' his interests.
He recently went on a controversial "personal" trip to North Korea where he urged the secretive state to allow its people access to the internet.
And last week he also grabbed headlines by claiming that China runs the most "prolific and sophisticated" computer hacking operation in the world.
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