Otto is reported to have paid around €1 billion (£747 million) for the stake.
Financial Times Deutschland said that there had been a dispute between Otto and WAZ over WAZ's entitlement to profits which had prompted the sale.
WAZ bought the stake from Michael Otto's father, Werner Otto, in the early 1960s. The capital raise helped to fund Otto's expansion. The group is the second largest etailer in the world after Amazon.