Tata Steel has entered into exclusive talks to sell its South Yorkshire speciality steels business for £100m ($124m). The business, which makes steel for the aerospace, automotive and the oil & gas industries, employs around 1,700 workers.
Tata said it was in "exclusive negotiations" with commodities trader Liberty House, which previously rescued Tata steelworks in Scotland a year ago.
The unit also includes sites in Rotherham, Stocksbridge and Brimsworth.
Chief executive of Tata Steel Bimlendra Jha said the move was "an important step forward in seeking a future" for the unit.
He added the "announcement is in line with the overall restructuring strategy of the UK portfolio."
Liberty House, run by the Gupta family, has been building a new steel business over recent years.
Liberty House said: "The planned deal, in combination with Liberty's existing industrial footprint in the UK, would establish the group as one of Britain's most significant steel and engineering employers."
However, Tata is yet to find a buyer for its Port Talbot site, the country's largest steelworks, which employs 11,000.
Tata's main UK steel business comes with a £15bn British Steel Pension Scheme, which has been a significant obstacle in the way of selling the operation. The UK government and Tata have been looking at ways of offloading that scheme to make the site more attractive to a buyer.
Sources close to Tata say that the Indian conglomerate could even keep the Port Talbot site, once the smaller UK sites have been sold.
Tata said it would pull out of the UK steel business last year, after it was unable to compete with cheap imports from China.