Tesco had seen the property business as a way of expanding its interests.
Tesco is in talks to sell its online property business to a chain of estate agents, the BBC has learned.
The supermarket giant launched Tesco Property Market in June last year, with a £199 service aimed at undercutting traditional home sellers.
Rival estate agents were furious - with some taking legal action to stop properties they were marketing appearing on the site.
Now one of Tesco's most vocal critics, Spicerhaart is set to buy the business.
Spicerhaart is the UK's largest independently-owned estate agency network, with more than 250 branches.
Under the plans, revealed by BBC Radio Five Live's Wake Up To Money programme, Tesco will market the business while Spicerhaart will own and operate it.
Confirming that a deal was in the final stages, Tesco said it had been reviewing its internet estate agency for some time, "and exploring ways in which we might be able to bring more value and choice to home movers".
"Spicerhaart will develop a new and comprehensive online estate agency service and this will be available to our customers at Tesco.com," it added.
The chief executive of Spicerhaart, Paul Smith, said the firm was developing a new innovative virtual estate agency business in partnership with Tesco.
"This business, which will benefit from our well established property expertise, will offer a high quality estate agency service. A further announcement will be made in due course," he said.
Tesco's original plan had been to give homeowners "For Sale" boards in exchange for their fee. They could also upload property photos onto the website but had to arrange viewing dates themselves.
Analysts say that the key problem with the business model had been getting enough buyers and sellers to come to the website.
Change of plan
Efforts to strike deals with property portals such as Rightmove and Findaproperty had failed as they saw the Tesco site as something that would undermine their own business.
Estate agents went to the Office of Fair Trading and asked it to review the situation.
As a result, Tesco suspended its facility to buy and sell homes - including the DIY £199 option - in October.
The OFT had decided that for Tesco to continue selling properties as it had planned it would have to abide by all the provisions of the 1979 Estate Agency Act.
The supermarket then kicked of a review of the property business it bought in 2006.