The French firm said in its annual results statement that it had decided "to explore all strategic options regarding The Body Shop's ownership".
It said this would give the chain "the best opportunities and full ability to continue its development".
It added: "No decision has been taken so far."
The Body Shop has more than 3,000 stores in 66 countries and employs 22,000 people, but has been suffering a slowdown in sales.
Its results for 2016 show total sales were 920.8m euros (Â£783.8m), down from 967.2m euros in 2015, which L'Oreal blamed on market slowdowns in Hong Kong and Saudi Arabia.
The sales were a tiny proportion of L'Oreal's overall 25.8bn euros of sales for the same period, up from 25.3bn euros in 2015.
The French group's overall operating profit last year was 4.54bn euros, up from 4.4bn euros a year earlier.
The Body Shop was founded in 1976 by Dame Anita Roddick, who died in 2007.
It was a pioneer using natural ingredients for its beauty products when it started out.
It initially thrived and by the 1980s, it was one of the best-known brands on the High Street.
Cosmetics giant L'Oreal has confirmed reports that it is looking to sell The Body Shop chain of stores, which it acquired in 2006.