"Today's announcement that the city is the government's preferred bidder is subject to Birmingham presenting "a compelling business case" that shows "clear value for taxpayers' money to receive government funding towards an official bid", said the Department for Digital, Culture, Media and Sport".
They still must secure approval from Prime Minister Theresa May and the Treasury, with the costs of staging expected to exceed £600 million.
Birmingham beats out Liverpool as the United Kingdom candidate city for the 2022 Commonwealth Games.
"Now, after a comprehensive assessment process, the government will look at the final bid proposal from Birmingham and decide if a formal bid will be submitted to the Commonwealth Games Federation".
The South African city originally won the bidding process in 2015 but the CGF was not convinced it could successfully host the event and started a search for a new host city.
The decision on whether the United Kingdom government believes the Birmingham bid will deliver "clear value for taxpayers' money" is expected to be made in the next few weeks.
"We congratulate Birmingham on their success and wish them all the best in securing the event for the United Kingdom".
Birmingham's Alexander Stadium will be upgraded into a 40,000 seat arena if the bid to host the Games is successful.
That leaves London's Lee Valley VeloPark, built for the 2012 Olympic Games, or the National Cycling Centre in Manchester, where the velodrome was built for the 2002 Commonwealth Games - as the two workable options.
Australia's Gold Coast is hosting the 2018 Commonwealth Games in April.
The event is up for grabs after Durban was stripped of hosting duties.
Mayor of Liverpool Joe Anderson tweeted: "Liverpool has lost its bid to host Commonwealth Games 2022 thanks to my team #proud".
Glasgow's staging of the 2014 Commonwealth Games was considered a financial success, raising the city's profile as a major events global venue, with next year's European Sports Championship the next competition staged there.