Water company Severn Trent is to sell the former Posenhall Reservoir, which is in the village of the same name a mile outside Broseley.
The former reservoir has now been filled in.
It will be sold by an online auction by Lambert Smith Hampton on February 11, and the company says it expects to see the site used for a self-built house.
The vacant 0.37 acre (0.15 hectare) plot is one of five that are to be sold on behalf of Severn Trent in the auction, along with three in Derbyshire and one near Worcester.
Oliver Childs, head of LSH Auctions, said: "The former reservoir sites are rurally located and in recent years, similar assets have been sold that have been converted to private dwellings.
"There is a continued shortage of development opportunities in the UK and these sites are ideal for entrepreneurial buyers."
He added: "Anyone can bid on our online platform without having to travel to an auction room or face the daunting prospect of bidding in public.
"You just need to register as a bidder on the site prior to the auction starting."
Adam Tustain, portfolio manager for Severn Trent Water, said: "We are keen to explore all modern tools available for disposal to achieve the best outcome for customers and shareholders."
In its guidance for the Posenhall site, Lambert Smith Hampton has pointed to government support for self-build properties, and national planning guidelines now take account of the growing appetite for Grand Designs-style building projects, following the success of the Channel Four programme.
One-off, bespoke properties are increasingly gaining planning consent, the company says, even in areas often constrained by planning policy, recognising that custom builds can be an affordable way into home ownership.