As per the proposed amendment, the highway will end at the start of the city and restart again where the boundary of the city ends, Chief Minister Manohar Parrikar said in the state Legislative Assembly last evening.
This will provide relief to the liquor shops, located in the cities, which are currently closed following the Supreme Court's order, he said.
"The State Highways Act would be amended to ensure that the roads passing through cities would no more be considered as highways," Parrikar said.
Te amendment will benefit liquor vendors in smaller cities like Ponda, Curchorem, Sanguem, Bicholim and others, he said.
The Supreme Court had last year year banned liquor vends within 500 metres of national and state highways.
However, the apex court had later modified its order, reducing the distance to 220 metres in areas having a population of up to 20,000.
The SC order came into force from April 1 this year, affecting nearly 3,000 liquor outlets in the coastal state.
The state government earlier tried to cushion the impact by denotifying a few highways which had alternate by-pass roads.
Parrikar had last month said in the House that the ban on sale of liquor along the highways was likely to cause a revenue loss of Rs 7 crore to the Goa government.