The secret nature of Porton Down's work would make the sale highly controversial, and guaranteed safeguards would be needed if it went ahead.
Whitehall sources confirmed last night that Porton Down was being considered under the sale of the Defence Evaluation Research Agency (Dera) which runs the chemical and biological establishment in Wiltshire.
The sale of Dera, which also runs the Royal Aircraft Establishment at Farnborough in Hampshire, where it is based, is backed by its management. It employs around 12,000 people and has a turnover of around pounds 1bn a year.
Gordon Brown, the Chancellor, stunned Labour MPs and caught the City by surprise earlier this month when he announced plans to sell off a stake in the National Air Traffic Service, the Tote, the Royal Mint, and the Commonwealth Development Corporation.
The Defence Evaluation Research Agency is one of the most successful of around 40 agencies carrying out work in the public sector for the Ministry of Defence.
The aerospace industry would be interested in its expertise in testing and repairing aircraft, and the possible profits to be made from a long-term defence contract. It carries out government business worth an estimated pounds 900m a year, with another pounds 100m in the private sector.
George Robertson, the Secretary of State for Defence, has been under intense pressure from Alistair Darling, Chief Secretary to the Treasury, to offer more MoD assets for sale as part of his strategic defence review.
The Treasury team has been trying to cut more than pounds 1bn off the pounds 22bn defence budget, and Mr Robertson has needed the support of the Prime Minister to beat off some the assaults on his defence programmes.
Dera is listed as one of three "trading funds" with the UK Hydrographic Office and the Meteorological Office under the MoD in the Treasury's national assets register. It says the assets at Porton Down include accommodation, test facilities, and laboratories. The agency also owns six wind tunnels, 16 satellite facilities, tank-testing tracks, a radio station, a fire station, jetties, and sea ranges across Britain.
Ministers fear that the wholesale privatisation of Dera could jeopardise its commercial links with US government laboratories. One minister was reported to have warned the Treasury that the Americans would "not play ball" with Dera if it was privatised.
Government sources said no decision had been reached about the sale.