The latest sale means so far it's raised nearly £14bn for the Treasury's coffers through a trickle of share sales, which were initially announced in December.
"It’s fantastic news that we’ve sold more shares in Lloyds Bank, taking the total recovered to almost £14bn," chancellor George Osborne said.
"I am determined to build on this success, and to continue to return Lloyds to the private sector and reduce our national debt."
Last week Lloyds posted figures showing pre-tax profit rose 28 per cent in the six months to the end of June - although that figure was below analysts' expectations. It also revealed that it's set aside £1.4bn to cover the cost of mis-selling payment protection insurance (PPI), bringing its total bill for PPI to £13.4bn.
The government was forced to throw Lloyds a £20bn lifeline during the depths of the global financial crisis in 2008, enabling the bank to stay afloat, and leaving the government with a 41 per cent stake.