The acquisition marks the first major investment by Ausgrid since it was partially privatised and its ownership transferred from the NSW government to superannuation funds AustralianSuper and IFM Investors in December 2016.
While the purchase price has not been revealed, AGL said it expected to record a post-tax profit on the sale of about $25 million.
The company said the divestment of the digital metering business was part of the company's strategy to broaden its reach and retain access of non-digital customers.
"AGL's decision to divest Active Stream reflects the evolution of AGL's strategy to become technology agnostic in the development of innovative, data-enabled energy products and services that are accessible to all customers, regardless of meter provider," the company said in a statement.
Active Stream was started by AGL in 2015 to install digital metering capabilities ahead of the Australian Energy Market Commission's Power of Choice regulatory reforms, which come into effect on December 1, and will give consumers more capability to participate in the energy market and establish a demand-side response mechanism.
Ausgrid said these regulatory reforms will provide a new area of growth for the industry, as "digital meters will be required for all new and replacement meters for small customers".
AGL developed the business as part of its wider 'New Energy' division, which it called its 'corporate innovation accelerator', and was part of the generator and retailer's push into non-traditional energy and technology.
This included rooftop solar, battery storage, and the potential integration of electric vehicle battery charging stations into the company.
Ausgrid said the acquisition of Active Stream was part of its strategy to gain increased exposure to the Power of Choice metering market.
"Ausgrid's ambition is to be the metering service provider of choice to major and minor retailers," Ausgrid chief executive Richard Gross said.
The company added that the "acquisition provides a solid platform to grow its significant digital meter footprint and will provide broader benefits to its unregulated business strategy".
Following the sale, Active Stream will still continue to provide digital metering services to AGL.
Active Stream has installed more than 230,000 digital meters across the national electricity market, which comprises Queensland, NSW, Victoria, Tasmania and South Australia.
The sale is expected to be completed early next month.
AGL's shares rose 1.5 per cent in early trading to reach $25.56, its highest point since March this year.