Liverpool and Birmingham have passed preliminary assessments in their bids to host the 2022 Commonwealth games.
Both cities have been the subject of recent inspection visits by an independent panel, Commonwealth Games Federation representatives and Department for Digital, Culture, Media and Sport officials.
Birmingham and Liverpool will now be given the opportunity to further develop proposals, requiring more detailed work on costings, practicability and delivery.
"I've been encouraged by the commitment and enthusiasm that both Birmingham and Liverpool have demonstrated so far in the process but it will be crucial that their final plans demonstrate good value for money, how they would leave a lasting legacy and showcase the best of Britain," said sports minister Tracey Crouch.
Commonwealth Games England chief executive Paul Blanchard added: "Birmingham and Liverpool have two fantastic sets of plans and either city would stage a Games to remember for athletes and spectators alike.
"There is still a huge amount of work to be done by both government and the cities themselves but what we have seen so far promises some very exciting times ahead."
The independent assessment panel will make a recommendation on a preferred city in September before the government makes a final decision whether to submit a formal bid to the Commonwealth Games Federation based on the overall value for money of hosting the Games.