The Government's farmer Landcorp is selling a Fiordland station to a Chinese buyer.

ONE News has learned the overseas investor outbid a local farmer to buy Jericho station, about 40km from Te Anau.

The Southland farmer had offered around $8.5 million for the sheep and beef operation, which is almost 1400ha.

The Overseas Investment Office will now have to sign off the sale, because farmland is deemed "sensitive".

Landcorp chief executive Steve Carden confirmed the sale.

"We have got a buyer from offshore who has put in the most attractive bid and that is the one we are pursuing at the moment," he said.

It's the first time Landcorp has sold a farm to an overseas investor.

We want to make sure that we are giving local buyers every opportunity - Landcorp chief executive Steve Carden

"I think over the course of the last 30 years we have sold 80 odd farms. Only once - this current situation - has it gone to an overseas buyer so it's very, very rare that it happens...there aren't always competitive local bids for our farms and we do need to look at overseas options if that is the case," Mr Carden said.

The state-owned enterprise has eight other sheep, beef and deer farms up for sale around the country as it looks to diversify its operations.

Iwi have been offered first refusal on all of them.

Mr Carden says Landcorp has to get the best deal for the taxpayer.

"We want to make sure that we are giving local buyers every opportunity we can to make a competitive bid and we work with local buyers quite significantly on that to help them - but once the process is finished we need to make the best decision for the business."

And Federated Famers agree.

It should be able to be farmed by New Zealanders - Eugenie Sage, Green Party Primary Industries spokeswoman

"Landcorp is a commercial operation so it has every right to sell a farm to whoever they want, but within the constraints of the Overseas Investment Office."

But the Green Party says only residents and citizens should be allowed to purchase farm land.