"Removal of the structure should be completed by that date," the authority said in a decision released late on Thursday.

The ACT Government now plans to consult the businesses operating at the site about when the village should be wound up and whether they want to relocate.

The prominent "pop-up" site at West Basin between Commonwealth Avenue and the lakeside was designed to bring people to the area, ahead of the ACT government's sale of land at West Basin for commercial and residential development.

But it has been dogged by problems in its two-year history including cost overruns, delays in construction, non-payment of contractors and low visitor numbers.

National Capital Authority chief executive Malcolm Snow referred to the container village in 2015 as a "damp squib" and raised concerned about lack of activity at the site.

Late on Thursday, he released the authority's decision to knock back the government's request for a further two-and-a-half years on site, giving it just one year, until November 19, 2017.

Mr Snow said the authority had considered public submissions and the planning merits of the village.

It has also considered the small businesses operating at the site, most offering food.

"We wanted to ensure that we did the right thing by these small business owners," he said. "Our decision gives these operators ample time to consider their relocation options."

In the meantime, the ACT government must "make the appropriate site improvements consistent with its prominent location".

"While we recognise that Westside Village is a unique installation that provides a temporary community event space for Canberra, we have decided to approve its operation for an additional 12 months only," he said.

Mr Snow said the one-year permit had followed comprehensive consultation over three weeks in August and September.

Of 62 submissions, 42 were opposed to the continued operation of the container village, with 20 supporting it, including two petitions.

Supporters liked the food, atmosphere, events, employment and small business opportunities.

Opponents pointed to low-quality design, inappropriate use of a highly-visible space, poor appearance, noise, untidiness, anti-social behaviour, and the significant spending on a temporary development, and expressed general opposition to development at West Basin.

"The NCA concurs with commentary that Westside Village is in a highly visible and prominent location and that it is not of an appropriate design standard for a long-term presence on the site," it said, noting the village was only temporary.

"The NCA has formed a view that a balance between the long-term impact on National Capital values and the short-term activation provided by Westside needs to be found. Although the execution of Westside Village has not entirely met the expectations of the NCA and some members of the community, the NCA has taken into account the LDA's recent efforts to improve the overall appearance of the site."

Both petitions were sent in a submission by Chief Minister Andrew Barr. They contained about 311 signatures, the authority said, but the numbers were approximate "because some of the writing is illegible and some signatures are not entirely clear".

One petition, containing 103 signatures and titled 'Save Westside Village', said: "Thousands of Canberrans enjoy the Westside Container village every single week. Sadly, the Liberals want to shut it down and take all the fun out of city. Sign the petition to support Andrew Barr to keep Westside open."

The second, signed by about 208, said: "Would you like to see Westside Village stay for the next 2.5 years?"

The authority has asked the Land Development Agency to update its noise management plan and revise its event strategy for the container's village's final year.

In August 2015, the ACT government resumed control from Stromlo Stomping Grounds, which was contacted to build and run the site, and has been running it directly.

Comment has been sought from Mr Barr.