In this paper a periodic review probabilistic inventory model for a single item with two storage facilities is developed; one warehouse is owned by the system under consideration (which is referred to as OW) and the other is a rented warehouse (RW). The capacity of OW is W units. Any quantity larger than W is to be kept in RW and are gradually withdraw in batches of K units. The model determines optimum values of lot-size q and k. An example is given to illustrate the results obtained.