A proposal to reduce Northbourne Avenue to two lanes has also been scrapped - for now - in the face of concerns about future traffic congestion along the corridor, according to a new planning framework.

The changes pave the way for the possibility of an additional 37,000 dwellings being built along the corridor between the Federal Highway and the city centre, with "urban villages" edging the new light rail corridor and creating a sense of vitality.

Proposed changes in the new planning masterplan also include rezoning to allow residential and mixed-use development at the Yowani Country Club golf course and Kamberra Winery sites and some increased building heights at Downer.

The new framework also encourages transforming Northbourne Avenue, between the heritage-listed Sydney and Melbourne buildings,  into "Northbourne Plaza" with increased places for pedestrians, cyclists, outdoor cafes and landscaping and improved use of heritage places.

The City and Gateway Urban Design Framework was launched on Wednesday to set "the long-term strategic direction for the city and gateway corridor".

The area in focus is the city centre and the linear corridor roughly 1km east and west of Northbourne Avenue, extending from Lake Burley Griffin to the Federal Highway, up to the ACT border.

Master Builders ACT chief executive Michael Hopkins said the framework brought some certainty to the industry.

“The transformation of the Northbourne Avenue and Federal Highway corridor is one of the most exciting opportunities for the local development and construction industry in decades," he said.

National Capital Authority chair Terry Weber said Northbourne Avenue was "the most important corridor in Australia", symbolically connecting the nation to the seat of democracy in Parliament House and needed to live up to its promise.

"To have a masterplan that will be set in place for the next 20 years or so really works well for the federal government and the ACT government together," Mr Weber said.

ACT Liberal Senator Zed Seselja, representing the Commonwealth, said Northbourne Avenue had the potential to be a spectacular entrance but "hasn't always been well-loved".

"So the idea behind this project will be to have a visually stunning boulevard, an avenue that is befitting a world city and the national capital," Senator Seselja said.

"There's been a lot of work that's gone into this between the National Capital Authority, on behalf of the Commonwealth, and the ACT government, to make sure we have a tiered approach from the Federal Highway, from the bushland setting, gradually getting more density as we approach the city.

"I've always been a big believer that we can preserve the best of our garden city, of our national capital, and what Canberrans love about it. But one of the ways we do that is we develop in our town centres and we develop along our major transport corridors and, obviously, Northbourne Avenue fits the bill.''

National Capital Authority chief executive Sally Barnes said there would be a feeling of coming into "something quite grand" moving from the Federal Highway towards the increasing heights and density of the city centre.

"The other thing that is really important, that we've heard from the community, is to make sure that as we build this grand city, we keep a human scale in terms of public realm, public places, have areas where people can spend time with each other and feel part of the city and the strategy sets out that long-term vision as well," Ms Barnes said.

The framework will be implemented by the National Capital Authority and the ACT government through a National Capital Plan amendment and Territory Plan variations, which are expected to be available for public comment in early 2019.

Planning Minister Mick Gentleman said the increased height limits would allow for increased density closer to the city. The population along the corridor is expected to grow from currently about 54,000 to 71,000 by 2031.

He reiterated the "human focus" would be preserved in any future development.

"That's why we've scaled back in the northern end to three storeys around Downer and Watson and build up in density as we go closer towards the city centre," he said.

"It's an important piece of planning framework that allows us to bring a renewal, if you like, and a bit of vitality to the very important corridor."

Mr Gentleman said trees would remain important along Northbourne Avenue and the Federal Highway.

"Our planning infrastructure plan says we should have a very green corridor so we want to ensure we keep as many trees as we can," he said.

"If trees need to come down, of course, we'll need to replant in that process, as we have done in the light rail corridor."

A final consultation report said an idea to reduce Northbourne Avenue to two lanes had been scrapped as the NCA and ACT government acknowledged "community concerns about congestion in the corridor and the value of Northbourne Avenue as a critical part of the transport network".

"Should this arrangement be pursued in the future (for either part or the full length of the road), detailed transport, planning and design analysis and community consultation will guide decision-making," the report read.

Concerns about increased building heights in some sections of Northbourne Avenue were also addressed.

The 22-metre building height at the intersection of the Federal Highway and Phillip Avenue, as proposed in the draft framework, had been removed from the final framework.

"In response to community concerns about increased building heights along the corridor on the Downer side of the corridor, heights have been changed to provide a more sensitive transition to the existing suburban context,'' the report read.

"Blocks fronting onto Banfield Street, Atherton Street, Bull Street, Blacket Street and Antill Street have been reduced from 18 to 12 metres. The blocks fronting Panton Street and Northbourne Avenue will remain at 18 metres.''

Meanwhile, tenders for the site of the former Northbourne Flats have closed. The ACT government is refusing to say how many people applied for the prominent blocks. The sale is part of the ACT government's sale of land in the corridor to pay for its light rail project and encourage higher-density city living near the city. A winning tender for both the Braddon and Turner blocks will be selected early 2019.