The Department of Culture, Media and Sport (DCMS) has cleared Birmingham and Liverpool for the final phase of its selection process.
Both cities will now be inspected in August, before the final decision in September.
The DCMS will then forward the bid to the Commonwealth Games Federation (CGF).
Birmingham and Liverpool were recently inspected to see if their bids were developed enough to be considered, and also if they left a good legacy for their city, region and the UK.
They must submit detailed proposals next month.
Liverpool's bid is a partnership with Manchester, which hosted the games in 2002.
Manchester's two potential venues are the Velodrome, which is the home of British cycling, and the Emirates Old Trafford cricket ground, although this depends on cricket being included in the 2022 games.
The main stadium for Liverpool will be a partnership with Everton FC which is planning to build a new ground at Bramley Moore Dock.
While the Birmingham plan envisages creating creating the UK's largest permanent athletics stadium.
Liverpool Mayor, Joe Anderson, said: "We will work tirelessly in the coming weeks to persuade the government that Liverpool is the right choice to help showcase Britain in a post-Brexit world."
The 2022 Commonwealth Games were stripped from Durban in March. The CGF has said the final decision will take place in the autumn.
Two English cities have overcome a major hurdle in their attempts to host the 2022 Commonwealth Games.