Every municipality has their own regulations as to lot size, frontage, and set-backs; front, sides and rear from the main structure. You may sell some of your land to your neighbor but if that in turn makes your lot smaller than the ordinance says it should be, you would have to seek a variance from Planning Board along with the creation of two (2) new lot sizes. This also involves drafting new surveys with new legal descriptions, and if approved, filing the new deeds and subdivision with the county. If you have a mortgage on your lot, you also must get written approval from your lender.
If all of the above can be accomplished, you then would find out what recent land sales were based on a $/sq.ft. and then use this figure as an asking price for the land you want to sell to your neighbor. Although I have 19 years of Zoning Board experience and 6+ years as Planning Board Chairman, my first suggestion is that you speak with a land-use attorney and a surveyor/planner to have them explain the cost and time involved in completing this type of sale.