A BID will be put in for £10 million to create a town square at the gap site and improve the High Street in Dunfermline.
Fife Council already have £500,000 set aside for the "exciting project" and will apply to the UK Government's Levelling Up Fund to pay for the rest of it with the aim of starting work next summer.
As well as a town square for hosting farmers' markets, performances, events and exhibitions, there would be a grassed terrace area, more planting and seating, a community orchard, a gateway feature and a community hub with public toilets and an information point.
On Tuesday, the City of Dunfermline area committee approved the design proposals, presented by landscape architect Paul Morsley, for the plot between High Street and Queen Anne Street.
Committee convener Councillor Helen Law said: "It's a very difficult site and you've come up with something quite magical so I have high hopes that we will see this delivered in the fullness of time.
"It's not going to be quick but Dunfermline deserves to have this really lovely green space.
"There may be other funding we can tap into but I think the Levelling Up Fund is going to be crucial in getting the whole project delivered as well as getting the whole High Street re-laid because it is a mess."
The Levelling Up Fund is a £4.8 billion pot of money set aside by the UK Government to help improve infrastructure, with applications invited for projects such as regenerating town centres and high streets, upgrading local transport and investing in cultural and heritage assets.
Iglu Studio was commissioned by the council in July to present options for the gap site and Mr Morsley said it was an opportunity to create "a really positive experience for the people living in, and visiting, Dunfermline".
The town square, with the relocated and refurbished Mercat Cross as a prominent feature, would "create a generous new public space" with staged seating for viewing events.
A new, wider path would go around the side of the site to the bus station, a large grassed area in the centre, with the plans including pine trees, a new link to Bruce Street, feature lighting, a community bench, heritage panel railing, ornamental shrubs and an 'accessible for all' ramp.
Assuming it gets planning approval, the project will be delivered in phases and should be completed in "two-to-three years" although it was pointed out that delays to the supply chain, and issues relating to COVID and Brexit, could hold it up.
Mr Morsley told councillors: "The visuals give the basic structure and bare bones, the detailed design would be the next stage.
"At this point, we're just trying to convey a sense of what it could look like rather than all the details."
The gap site was once at the bustling heart of Dunfermline with a huge Co-op department store dominating both sides of the now-disappeared Randolph Street.
The store closed in 1990 and the boarded-up and derelict buildings became an eyesore in the town centre.
Alfred Stewart Properties Ltd bought them in September 1999 but after losing patience with the company for their failure to redevelop the site, the council moved to demolish the buildings and pursued a compulsory purchase order in February 2006, eventually paying £3m.
The site was put up for sale but there were no takers.
Cllr Law said: "For many years, we were told it was to become some kind of economic development with shops and restaurants.
"That clearly hasn't happened and there's no signs of it in the near future so this is absolutely the best way forward.
"It's long been my ambition to turn that site into a city centre square and if it's possible to move the Mercat Cross in there it would give it a real feature."
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