Saracens have been told they will have to move their Heineken Cup match against Biarritz in South Africa from the Cape Town Stadium to Newlands.
The Western Province Rugby Football Union says the game on 14 January should be played in the region's "home of rugby".
Saracens said: "We're delighted that two world-class venues in Cape Town want to stage the historic match."
The Premiership champions added: "We will now continue detailed discussions with all parties."
Newlands Stadium is home to the Western Province rugby union side and can hold up to 51,900 spectators.
The Cape Town Stadium has a capacity of 55,000 but was built initially as host stadium for the 2010 football World Cup.
In a statement the WPRU said: "The WPRFU Executive Committee unanimously agreed that Newlands is currently the home of rugby in the Western Province, and will be treated as such for the foreseeable future.
"The Western Province Rugby Football Union embraces such a historic match which will form part of the busy 2012 Super Rugby and Test match schedule at Newlands Stadium.
"Newlands is one of the oldest rugby stadia in the world, with excellent facilities and currently boasts some of the highest attendance levels in world rugby.
"The decision to agree to the hosting of the match at Newlands was made in the best interests of WP Rugby and once again shows loyalty to its suite holders and fans who regularly attend matches at Newlands.
"The WPRFU wholeheartedly embraces the idea of Cape Town attracting international matches and looks forward to hosting other high-profile matches at Newlands."