The Charlotte St camping ground, nestled between Naish Park and the Clutha River, was put up for sale last month after the death of its lessee.
It is listed with Ray White Balclutha for offers of more than $210,000, plus GST.
Council chief executive Steve Hill said the camping ground was being sold to allow its new owners to reap the rewards of "strategic investment" in the business.
The sale follows similar sales by the council of the Lake Waihola Holiday Park in 2016, and the Kaka Point Camping Ground in September last year.
Under the previous model of council ownership of both above- and below-ground assets, lessees lacked any incentive to invest and upgrade the businesses, Mr Hill said.
"Council will retain below-ground assets and lease the land to the new owners, who will own all above-ground amenities knowing they can invest in improving facilities and can sell in the future, should they wish to and there is a market."
He moved to quash fears the camping ground could be closed or converted to private use after a sale.
"As we retain control over the land use, in most cases subject to the Reserves Act, it will always remain a camp ground."
Ray White agent Bryan Hayden, who is overseeing the sale, said the camping ground had already garnered "significant" interest from across the country.
"It's a great location, with amenities that have been well looked after and the potential to expand for the right investor. Of course, there's always potential for improvement with any tourism business, but that can be part of the appeal for buyers."
The 4750sq m camping ground comes with 26 powered sites, eight permanent caravans, six cabins, tent sites, an amenities block and a two-bedroom caretaker's dwelling, in an established parkland setting.
The council had approved additional land for expansion, if required, Mr Hayden said.
"I think we'll see a purchase decision being made shortly."
Lake Waihola Holiday Park owner Peter Michelle said he was watching the Balclutha sale with interest.
"It's worked out very well for us, so it won't be a surprise to see it snapped up by someone. It's been a good arrangement with council."
