Points:
As other mentionned, you can process in steps.
I would like to explain this with my own words (differs on point 3) :
Read the file sequentially, process N records at a time in memory (N is arbitrary, depending on your memory constraint and the number T of temporary files that you want).
Sort the N records in memory, write them to a temp file. Loop on T until you are done.
Open all the T temp files at the same time, but read only one record per file. (Of course, with buffers). For each of these T records, find the smaller, write it to the final file, and advance only in that file.
Advantages:
Exemple with numbers:
EDITED
You mentionned a multi-threaded application, so I wonder ...
As we seen from these discussions on this need, using less memory gives less performance, with a dramatic factor in this case. So I could also suggest to use only one thread to process only one sort at a time, not as a multi-threaded application.
If you process ten threads, each with a tenth of the memory available, your performance will be miserable, much much less than a tenth of the initial time. If you use only one thread, and queue the 9 other demands and process them in turn, you global performance will be much better, you will finish the ten tasks much faster.
After reading this response : Sort a file with huge volume of data given memory constraint I suggest you consider this distribution sort. It could be huge gain in your context.
The improvement over my proposal is that you don't need to open all the temp files at once, you only open one of them. It saves your day! :-)