Preston and South Ribble councils have been give three months to come up with a plan to merge into a new unitary authority.
The minister in charge of reform of local councils, Phil Woolas, said that if district and county councils want to change, they have to speak up now or miss the "short window of opportunity".
County and district councils are being given the chance to become single tier authorities under the long awaited local government White Paper, out on Thursday.
He said that if councils want to change, they may apply to do so, but if other areas are happy as they are, they can remain as they are.
Preston and South Ribble want to become a unitary authority and they are expected to start a consultation process on the changes shortly.
Mr Woolas told the Lancashire Evening Post that any bids would be looked at "closely and favourably"
"The message to Preston and South Ribble councils is that they have 12 weeks to put together proposals which will be judged against various conditions.
"In the end, the decision will be based on what is in the interests of the whole of Lancashire."
The changes are part of a major overhaul of local government which will see more powers handed to local authorities.
Councils will be able to set their own by-laws and will also be given new powers to hold public figures, such as hospital trust chief executives and senior police officers, to account.
Preston City CouncilSouth Ribble Borough Council