Small bars will also be able to stay open later in inner city areas such as Glebe and Surry Hills, and buzzing late-night trading precincts will emerge in fast-growing residential areas like Green Square.

Those are among changes the City of Sydney is proposing in response to its first review in a decade of the planning controls that decide trading hours and locations of night-time premises across the city.

Lord mayor Clover Moore said the council's proposed changes to late-night trading were in response to "overwhelming" public feedback in favour of "a diverse and exciting night-time economy".

"What [people] do not want is a city that is unsafe or that shuts down as soon as the sun goes down," she said.

Cr Moore said the changes "set the foundations for a truly 24-hour Sydney into the future" and struck a balance between allowing well-managed venues to continue to trade and any potential impacts on local neighbourhoods.

The planned 24-hour trading zone for the city's centre would stretch from Darling Harbour to Hyde Park, and south to Central station. Most businesses in that area can already trade until 5am.

The extended trading hours would not affect the NSW government's controversial 1.30am lockout laws that apply to clubs and pubs across Sydney's CBD and Kings Cross.

But they would mean unlicensed shops and businesses, such as bookstores, clothing shops, banks, drycleaners and hairdressers, could trade around the clock.

Sydney Business Chamber executive director Patricia Forsythe supported the idea "in principle" and said it would give other businesses, such as shops and eateries, more options and greater flexibility.

"That said, many businesses won't take it up in the short-term. A night-time economy may evolve over time, but just because you change the zoning it doesn't evolve as a matter of course.

Ms Forsythe said there was also "obviously going to be a cost factor" for many businesses.

"For some businesses, keeping a door open 24 hours isn't viable, because there's not the patronage," she said.

Cr Moore said more late-night venues in the city centre might eventually reduce crowds, queues and noise at busy night-time hotspots at Newtown and along George Street.

The council has also proposed extending trading hours from midnight to 2am for shops and "low-impact" businesses, including small bars, licensed cafes and restaurants, in "local centres" such as Glebe and Surry Hills.

The council's planning policy manager, Ben Pechey, said the changes reflected strong community feedback for more late-night venues outside the city centre.

"We're trying to get a more dispersed approach to late-night trading in appropriate precincts," he said.

"People were really interested in having options where they live."

Venues that wanted to extend their trading hours would be subject to trial periods, and in some areas they would only apply if patrons entered and exited from a main street.

New late-night trading precincts would also be established in areas such as Barangaroo, Green Square and Danks Street at Waterloo to cater to booming residential populations.

Existing late-night trading areas in Chippendale, Redfern west Surry Hills and parts of Potts Point would be expanded.

An industrial area in North Alexandria has also been earmarked as a 24-hour trading precinct to encourage its use as a future arts, culture and entertainment precinct.

Cr Moore said the planned night-time precincts had been chosen for their proximity to public transport, including stations for the Sydney Metro which will eventually run 21-hours a day.

"We're hoping that there will be extensions of buses and trains, particularly trains," she said.

Sydney Fringe Festival chief executive Kerri Glasscock believed the proposed reforms offered the "best possible chance" for Sydney to revive its night-life.

"It has identified potential future areas and safeguarded them for cultural use, it has acknowledged night-time businesses that do provide cultural opportunities and offerings are unique and should be rewarded if they're not at risk, and and it's also highlighted the need for us to increase our 24-hour offering as a global city."

Councillors were briefed on the draft planning controls on Monday afternoon. They will vote on the proposed changes later this month before they are put on exhibition for public feedback.

The proposed reforms were informed by more than 10,000 residents and visitors surveyed on the city's nightlife earlier this year.

Sydney's night-time economy is worth more than $4 billion to the NSW economy each year and employs more than 35,000 people.