National Lottery operator Camelot is set to lose its licence to run the lottery after 28 years.
It comes as the Gambling Commission named rival Allwyn Entertainment as its "preferred applicant" to take over.
The decision is expected to be confirmed later this year with a transfer to the new operator set to be completed by 2024, it added.
This is when the current licence run by Camelot is due to expire. The new licence would run for ten years, until 2034.
Camelot, which has been bidding for its fourth licence, has been in charge of running the National Lottery since the game began in the UK in 1994.
It has been named as the "reserve candidate" should any issues arise in Allwyn Entertainment securing its licence.
In a statement released today, Camelot CEO Nigel Railton said he was "incredibly disappointed" by the announcement.
"But we still have a critical job to do – as our current licence runs until February 2024," he said.
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"We’re now carefully reviewing the Gambling Commission’s evaluation before deciding on our next steps.
"I’m enormously grateful to our 1,000-plus employees who have been unwavering in delivering record-breaking results during the current licence."
The "preferred applicant" Allwyn Entertainment - previously known as Sazka Entertainment until last year - is a gambling group owner by Czech energy billionaire Karel Komarek.
It currently operates across Europe including in Austria, the Czech Republic, Greece and Cyprus, and Italy.
Alongside Allwyn, the other applicants that had applied to succeed Camelot are Sisal Spa, Camelot UK Lotteries Ltd, and The New Lottery Company Ltd.
The fourth competition for the National Lottery licence had been delayed by a year because of coronavirus.
The Gambling Commission said in a statement: "The selection of Allwyn as preferred applicant follows a fair, open and robust competition which received four applications at the final stage.
"This is the highest number of applications since the first National Lottery licence was awarded in 1994.
"Allwyn has committed to investment in the National Lottery that is expected to deliver growth and innovation across the National Lottery’s products and channels, resulting in increased contributions to good causes, subject to the protection of participants and propriety.
"This milestone marks the first day of a legal standstill period, lasting at least 10 days, that will be followed by a 22-month transition towards the fourth licence."
Allwyn said: "We welcome today's statement by the Gambling Commission that we have been selected as the preferred applicant for the fourth National Lottery licence.
"Our proposal was judged to be the best way of growing returns to good causes by revitalising the National Lottery in a safe and sustainable way.
"The appointment of Allwyn will breathe fresh life into the National Lottery."
Since its launch, the National Lottery, one of the world’s largest lotteries, has raised more than £45billion for 660,000 good causes and created more than 6,300 new millionaires, the Commission said.
