The organisers of the Island Games 2011 have said the event may have to be cancelled because Isle of Wight Council is withholding £350,000 of funding.
It is set to be held in Ryde between 25 June and 1 July next year and will be the largest sporting event held in the UK prior to the Olympic Games in 2012.
About 4,000 athletes and supporters from 24 member islands are set to attend.
The council wants assurances it will go ahead before it releases the grant.
Councillor George Brown, deputy leader of the council, said: "The committee know that they have to convince us that the games are going ahead.
"Well, convince is the wrong word - they have yet to confirm to us that the games are definitely going ahead."
But David Ball, chairman of the Island Games Association, said about £1.5m was needed to stage the games and without the council funding the preparation work would stall.
He added: "We're at a stage now where bills are coming thick and fast.
"We get the opportunity every so often to get a really good deal on equipment and to do that you need to pay quite quickly and that is causing us some headaches.
"If we didn't get [the money] I dread to think, we'd be dead in the water. Without that money I don't see how we could run."
If the games were cancelled it would be the first time since they were established on the Isle of Man in 1985.
There are 25 member islands who compete biannually around the world in up to 14 sports chosen by the host island from a list of 18.
The sports chosen for the Isle of Wight Island Games 2011 are: Archery, athletics, badminton, basketball, cycling, football, golf, sailing including windsurfing, squash, swimming, shooting, table tennis, tennis and volleyball.
The last time the games were held on the Isle of Wight was in 1993.