The landmark figure represents a significant hike in costs from the estimated £800,000 pricetag of the 2006 event.
In a report produced by the organiser, Wordsearch's Peter Murray, for backers and supporters, it is admitted that the costs are set to jump because of plans to expand on the wildly successful 2006 event.
Last year's LAB was kicked off with a sheep drive across the Millennium Bridge which attracted thousands of spectators (pictured).
However, events in 2008 could dwarf this. The report stated: 'The continuing expansion of the biennale will have cost implications for the organisation and management of the event.
'In 2008 the direct cost of staging the event is likely to exceed £1 million for the first time. As a result, increasing consideration will need to be given to whether costs are borne predominantly by the public sector, the private sector or a mixture of the two (and if so what the balance would be).
'However, market research suggests that people would like to see the biennale continue to expand and develop; 71 per cent of respondents thought that LAB O8 should be bigger and encompass more boroughs,' the report added.