The new investment could be "10 times bigger" than the €265 million (now $297 million) Wanda paid last year for a historic Madrid skyscraper, said the leader of the Socialist Party group in the council, Antonio Miguel Carmona.
The real estate and entertainment group owned by Chinese billionaire Wang Jianlin bought the skyscraper on the Spanish capital's Plaza de Espana in June 2014. It also wants to build a shopping centre and water park in Madrid's Latina district.
Now Wanda has "expressed its intention to carry out a third big project in Madrid," Carmona told a new conference.
"They did not give concrete details but... they valued it about 10 times bigger than the Plaza Espana operation."
In April Jianlin also bought a 20-percent stake in Atletico Madrid football club for €45 million.
Madrid's new anti-austerity mayor Manuela Carmena has put investors on edge by vowing to sternly scrutinise big building projects approved by the former conservative council.
Leader of a group born out of Spain's "Outraged" protest movement, the 71-year-old former judge Carmena clinched control of the city hall with Carmona's support after last month's elections.
Carmona said he met on Thursday with top Wanda executive Michael Qiao after the Chinese group contacted him to express its "concern for its investment" under the new mayor.
He said Wanda and the council had set up a commission to discuss the development and will consult citizens and environmental groups.
Wanda reportedly wants to turn the building into a hotel and shopping centre.
The commission will discuss how "to save Wanda's big investment in Madrid on condition that the project benefit the citizens and not cost city hall a single euro", Carmona said.
Carmena herself met on Wednesday with the head of another major real estate project dubbed Operation Chamartin, the city hall said, without giving further details.
Developers behind the project in the northern Chamartin district of Madrid aim to spend at least €1.5 billion to build 17,700 homes plus parks and skyscrapers.