Tsang said the talks have involved building a park on outlying Lantau Island. He cautioned that much remains to be done to conclude the deal.
A Disney spokesman here confirmed that the company is in preliminary talks with the Hong Kong government to "explore the feasibility of locating a theme park destination resort in Hong Kong."
Disney, based in Burbank, Calif., has theme parks in Florida, California, France and Japan.
Tsang confirmed the long-rumored talks with Disney as he presented a budget proposal that includes both a tax rebate and a deficit.
Local business and tourism representatives expect that a Disney park would help revive flagging tourist numbers, which fell 8 percent in 1998 to 9.6 million from the year-ago period.
However, Dong Tao, an analyst at Credit Suisse First Boston, warned against over-optimism.
"Nothing is finalized at this stage and Disney still can walk away from negotiation," he said. It took Eurodisney two years to finalize negotiations for its theme park near Paris, he noted.