The House of Lords heard “nothing can happen” with the proposed school at Magee without the finalised plan.
The Ulster University previously blamed delays on the lack of a Stormont Executive.
But NIO minister Lord Duncan said progress “rests with the institution itself to put forward the case.”
He was responding on Monday to a question from former Northern Ireland Assembly Speaker Lord Alderdice.
Lord Duncan said: “If the university is indeed in such a position [to put forward a case] it should do just that and put together its case to initiate the proceedings, because nothing can happen until that has been completed.”
Lord Duncan added that while it remained a matter of “devolved authority” the “first step will necessarily be taking forward the examination of the business case”.
A business case has been submitted to the Department of Health (DoH) in Northern Ireland but it remains at an outline stage.
“Work is continuing on the outline business case, and we cannot comment on the detail of this until it is completed,” a DoH spokesperson said.
The medical school at Magee was meant to open this year but Ulster University’s vice chancellor said it had been held up by the lack of devolved government.
The only medical school in the North of Ireland at present is at Queen’s University in Belfast.
It is hoped about 60 doctors will train in Derry in the first year of the medical school.
It is planned that student numbers at Magee will rise to 120 students a year within five years of the school opening.
The expansion of the university in Derry and the opening of a medical training in school in the north west has long been regarded as a catalyst for economic growth in the region.
About £70m of the £105m city deal funding package has been allocated to the Ulster University to facilitate the expansion of Magee.
This would include the graduate entry medical school centres of innovation and excellence in data analytics and robotics and automation.
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