FORREST SHERMAN was decommissioned 5 November 1982 and designated by the CNO as a retention asset.  She arrived undertow at the Inactive Ship Facility Philadelphia 19 November 1982.  She was stricken from Naval Vessel Register 27 July 1990 and designated by CNO for disposal by scrapping.  The Navy Curator removals were completed 10 April 1991.  Item Manager, Fleet, and other Government agency stripping completed 30 August 1991.  Reported to Defense Reutilization and Marketing Service (DRMS) as ready for scrap sale 3 April 1992.

The scrapping rights to FORREST SHERMAN were sold by DRMS in January 1993 to Fore River Shipyard & Ironworks in Quincy, MA.  She departed Philadelphia to Quincy by tow on 8 February 1993.  On 20 June 1994, DRMS approved awarding a scrapping contract to N.R. Acquisition Corp. for scrapping in Wilmington, NC.  She was subsequently towed from Quincy, MA to Wilmington, NC.

DRMS terminated the contract for default on 1 October 1996 due to non-performance on FORREST SHERMAN and because State environmental permits were not renewed.  The Navy towed her in October 1996 from Wilmington, NC to Philadelphia with 0% scrapping accomplished.

FORREST SHERMAN was subsequently scheduled for disposal as a target vessel in a scheduled SINKEX during January 2001.  At the intervention of the newly formed USS FORREST SHERMAN DD-931 Foundation, Inc. in November 2000 the ship was given a six-month reprieve by Commander, NAVAL SEA SYSTEMS COMMAND, to allow the Foundation time to submit a formal request to have the ship placed into a donation hold classification.

In June 2001 the Foundation submitted a formal request to have the FORREST SHERMAN placed into a donation hold.  As a result of the Foundation’s efforts the USS FORREST SHERMAN DD-931 was placed into a two-year donation hold status by the Chief of Naval Operation effective 1 August 2001.