Australia's Crown group and Sri Lanka's John Keells Holdings are to build two 'integrated resorts' with luxury hotels, dining, shopping, conference, entertainment and gaming facilities.
The move has run into a political storm after laws related to casinos were changed to reduce taxes and religious leaders have also expressed concern.
Investment promotions minister Lakshman Abeywardene said no new licenses would be issued and two of four existing operating casinos are expected to tie up with the new integrated resorts.
"Already one company has struck a deal and it is said that the other company is also expected to do so," minister Abeywardene said in a statement.
He said ideas being spread that new casino licenses will be issued were not correct.
Minister Abeywardene said it was widely known than four casinos were now operating in Colombo and they had paid requisite fees to the state. But they were scattered around the city, and the administration wanted to consolidate them in one area.
The casinos are said to have de facto 'licenses' partly due to their owner having run them for a long time, and paying an annual levy, though a new gaming law has required specific license to be issued.
Opposition legislator Harsha de Silva has asked casinos to be licensed insisting that a tax receipt was not a 'license' and had called for a gaming regulator to be formed as is done in countries like Australia.
He has also criticized tax holidays given to casinos.
Casino resorts are expected to draw high rollers from India and China, pushing up room rates and occupancy in Colombo city hotels. Analysts have said that after Marina Bay Sands set up a large casino in Singapore hotel rates went up by around 20 percent.