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The hotel is targeting visitors from the Netherlands, Germany, Switzerland and the Far East and is also looking for local tourists, the report said.
Udawalawe, near the man-made reservoir of the same name, is a popular safari destination to watch elephants and also for bird watching.
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The 'Grand Udawalawe Safari Resort' is a 750 million rupee venture, Sri Lanka's The Sunday Times newspaper said.
The property is owned by Rosen Lanka whose lead investor is Environmental Laboratary Services Group, the report said.
A former politician in the area Ananda Kularatne, who has an export firm is also a director.
The report said the directors had invested 300 million rupees and the rest had come from a loan from state-run Bank of Ceylon.