Proposals are currently being put in place for three casino licenses in Japan, with several companies keen on operating an integrated resort in Osaka.
Yumeshima is a 143.3 hectare area (1.4 million metres) that was previously earmarked for industrial use.
However, the Osaka City Planning Council has agreed to change the island’s purpose in a bid to promote it as a tourist hub.
The Council said: "We will guide reasonable land usage for the purpose of creating a new international tourism hub on the coastal area, which can be easily accessed from the city and where a large amount of land can be secured."
MGM Resorts International has laid out its Osaka-first strategy in Japan, while Melco Resorts and Entertainment has also targeted the city.
But Caesars Entertainment recently announced it will not be pursuing a Japanese casino license at all and Las Vegas Sands confirmed it will focus on locations away from Osaka.
