"I can confirm that... the dismantling of the ship will take place in an Italian port," Transport Minister Maurizio Lupi said on Friday.
Several ports had been bidding to win the contract to dismantle the wrecked ship, including ports in Britain, France, Norway and Turkey.
Italy's Il Sole 24 Ore newspaper reported that the ship would be scrapped in Genoa, though Lupi said the final decision was still to be taken on which of several possible Italian ports would get the bid.
According to Il Sole 24 Ore, the ship's owners have chosen a consortium consisting of oil service company Saipem and Genoa-based companies Mariotti and San Giorgio.
It added that Costa Cruises, Europe's biggest cruise operator, had decided to begin the delicate operation to re-float the vessel on July 20th.
The stricken ship would then be towed 280 kilometres (170 miles) to Genoa.
The ship was hoisted upright from its watery grave in September in the biggest-ever salvage operation of its kind, during which the remains of one of two missing victims were discovered.
Costa has already spent €1.1 billion on the salvage operation and scrapping the wreck in Genoa is likely to cost in the region of €100 million, according to Italian media reports.
The trial of the ship's captain, Francesco Schettino, for manslaughter, causing a shipwreck and abandoning the vessel before all its passengers had been evacuated, started in July last year.