The retailer of high-end gadgets and appliances said a sale was the best route, in light of the weak U.S. economy and credit crunch.
"Given the present retail climate and specialty nature of the company, as well as the limited financing available to the company, a sale of its business and assets at this time will preserve values and yield the best recovery to the company," said Robert Conway, Sharper Image's chief executive.
The company said it wants to complete the sale by the end of May and will prepare for an auction of its business as soon as possible.
Earlier this month, Jerry Levin, the chairman of Sharper Image's board, resigned and said he was interested in partnering with other investors to buy some or all of the company.
At that time, Conway said the San Francisco-based chain would fully consider any proposal.
Sharper Image struggled through three years of losses and litigation involving its Ionic Breeze air purifiers. Its shares closed Wednesday at 23 cents.