North Yorkshire independent school Malsis has submitted a planning application to Craven District Council to build 46 houses on a small part of its site.
The school said money raised by the sale will be crucial to its future over the next five years and will also enable it to improve facilities.
Marrtree, property investor and developer, and Leeds-based Chartford Homes plan to build the properties, including affordable housing, on land near the main school entrance and also on redundant land at the rear of the school.
Together, these developments would raise capital which would enable Malsis to secure its future and to provide facilities for the local community.
Headmaster Marcus Peel said: "We have thought long and hard about the future of Malsis and its role in the local community, and we believe that releasing some of the school's derelict and under-used land is the only option available to us."
He added: "These are challenging times for independent schools across the country and Malsis is no exception. But, as we approach our centenary in 2020, we remain proud of our history and our achievements and are determined to plan for the future."