CEO Michael Huseby said in an interview with The Associated Press that the separation is the best option for shareholders.
"The businesses can achieve a more favorable capital structure and also operate at a higher level," if they are separate, he said.
Barnes & Noble spent years investing heavily in its Nook e-book reader and e-book library, but they struggled to be profitable. In December, the company said it was evaluating the future of its tablets, but it still offered a new non-tablet e-book reader during the holiday season. Huseby said the company will continue to offer its Nook glowlight e-reader but for the most part the Nook business will focus on software and its e-book library.
The company expects the separation to be complete by the end of the first quarter of the next calendar year, implying April of 2015.
The New York-based chain, which announced earlier this month that it was teaming with Samsung to develop Nook tablets, said that its board has approved the separation plans. It hopes to complete the separation by the end of 2015's first quarter.
Barnes & Noble Inc. also reported its fiscal fourth-quarter loss narrowed to $36.7 million, or 72 cents per share, from a loss of $114.8 million, or $2.04 per share, a year earlier. Revenue for the period ended May 3 edged up to $1.32 billion from $1.28 billion.
Analysts surveyed by FactSet expected a loss of 49 cents per share on revenue of $1.19 billion.
Looking ahead, the company anticipates that fiscal 2015 sales at bookstores and college stores open at least a year will decline in the low-single digits.
Shares rose $1.26, or 6.1 percent, to $21.82 in midday trading. The stock had been up 38 percent since the beginning of the year.