The Cosmopolitan, a two-tower complex located on the Las Vegas Strip, cost more than $4bn to build but has not made a profit since it opened in 2010.
Deutsche took over the property after its developer defaulted on a loan.
But Germany's largest bank said it moved to sell the development because it was not central to its business.
"The bank is committed to reducing its non-core legacy positions in a capital-efficient manner which benefits shareholders," Pius Sprenger, Deutsche's head of non-core operations said in a statement.
Blackstone beat at least two other bidders for the Cosmopolitan, which is 52-stories high with nearly 3,000 rooms and has a prime location on the Las Vegas Strip.
The Cosmopolitan has lost about $100m annually for the past four years, which was largely due to a wider slowdown in Las Vegas.
The US gambling capital has struggled to recover from the 2008 financial crisis, which saw a sharp drop in revenues for many of its casinos as people reined back on spending.
Nevada was also one of the hardest-hit states by the sub-prime mortgage crisis, with property prices  plunging by more than 50%.
However, business has since picked up in Las Vegas, with visitor arrivals, hotel room rates and spending on the rise.
Deutsche Bank has sold the lossmaking Cosmopolitan of Las Vegas casino and resort to private equity giant Blackstone for $1.7bn (Â£1bn) in cash.