Liberal leader Jeremy Rockliff, who is aiming to be re-elected after calling an early poll for March 23, acknowledged the $715 million waterfront stadium wasn't "everyone's cup of tea".
A roofed stadium at Macquarie Point in Hobart was a requirement for the AFL granting the island state a licence for a team, expected to take the field in 2028.
The state Liberal government has pledged $375 million to the stadium.
The federal government is chipping in $240 million, the AFL $15 million, while $85 million is slated to come from borrowings and the private sector.
On the first day of the election campaign, Mr Rockliff said a re-elected Liberal government would cap capital expenditure at $375 million.
"We've drawn a line in the sand," Mr Rockliff told reporters on Thursday.
Mr Rockliff said he would explore options to secure private investment for the project.
Under the Liberals contract with the AFL, the state government is responsible for any stadium cost overruns.
Mr Rockliff said his announcement didn't violate the contract, which he said was not up for negotiation.
The proposed AFL stadium in Hobart has created political drama in Tasmania. (HANDOUT/AFL)
Labor leader Rebecca White has described the Macquarie Point stadium as bad for Tasmania and says she wants to renegotiate the deal with the AFL if elected.
"Jeremy Rockliff has finally admitted you can't build that stadium at Macquarie Point at that price, in that timeline," she told reporters.
The AFL said a 23,000-seat roofed stadium at Macquarie Point remained a clear requirement of the 19th licence.
"That position was clearly reiterated by the AFL CEO when he appeared before the Tasmanian parliamentary committee last year," an AFL spokesman told AAP.
"The Tasmanian AFL club continues to make great progress led by chairman Grant O'Brien, its board and recently appointed staff members Kath McCann and Jack Riewoldt.
"We look forward to the unveiling of the club's name and colours in March."
Concerns over the stadium and AFL deal were partly responsible for two backbenchers quitting the Liberals and plunging the government into minority eight months ago.
Labor leader Rebecca White has described the Macquarie Point stadium as bad for Tasmania. (Loic Le Guilly/AAP PHOTOS)
Critics have argued the stadium is not the right priority for the state amid shortcomings in health, housing and education.
The Greens, who are anti-stadium, said Mr Rockliff was trying to get the private sector to pay for cost blowouts.
A recent opinion poll suggests neither the Liberals or Labor will be able to form majority government at the election, with the lower house increasing from 25 to 35 MPs.
Mr Rockliff says he is open to forming minority government on certain terms, but ruled out any power-sharing arrangements with the Greens.
The Liberals start the campaign with 11 incumbent MPs, while Labor has eight, the Greens two, and there are four independents.
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