Developer Geocon has plans to demolish the iconic, heritage-listed Gus' cafe which has been on the same site in Bunda Street for more than 50 years.
But Geocon says it will rebuild the cafe - in the same spot - as part of its proposed $130 million Garema Place hotel.
Plans for the 11-storey development have been submitted to the Planning Directorate and a decision is pending.
Now called Gus' Place, the cafe was closed in 2016 and re-opened in 2017 after major refurbishments.
It's understood the current owners of the cafe have not been officially informed of the developer's plans.
However, a Geocon spokesman said the company had "met with tenants on several occasions".
Gus' cafe is heritage-listed but that is unlikely to stop its demolition, the listing more about its "intangible heritage" rather than the "physical fabric of the building".
The ACT Heritage Council chair David Flannery said on Wednesday that the council had considered the Geocon proposal and already given advice the plans should be allowed to go ahead, including the demolition of the cafe, which opened in 1967.
Mr Flannery said the council had asked that the Gus' name, the plaque in the footpath outside the cafe and "the character of the place" be retained and included in the rebuilt cafe.
"There is nothing important in the building itself. It's the intangible heritage we're trying to protect," he said.
But opponents of the plan, including Danny Corvini, are calling on Canberrans to "wake up and smell the coffee" and save a treasured part of the national capital's social history.
Mr Corvini said Gus' was "a true Canberra icon, a slice of our history with only Tilley's in Lyneham for comparison remaining"
Geocon wants to build its proposed $130 million Canberra City Luxury Hotel at 60-70 Bunda Street, adjoining Garema Place.
A Geocon spokesman said on Wednesday, pending approval from the ACT Government, work on demolishing the site was expected in the coming months.
"As part of the new build - we have committed to reinstating Gus' as one of the alfresco eateries on the ground floor. We're fully aware of its cultural significance to Canberra and its inclusion has been considered carefully," the spokesman said.
The Geocon spokesman said Gus' would be rebuilt in the same spot.
"Gus' will have the same character, look and feel - but it won't be a carbon copy. The plan is to put it in exactly the same spot it's in now," he said.
Gus' cafe was started in 1967 by Gus Petersilka who pioneered open-air dining in Canberra and was the 1978 Canberran of the Year. There has been a cafe on the site since 1960, previously known as the Prague Coffee Bar. Mr Petersilka waged a five-year battle to introduce European-style outdoor dining to Civic.
Although Gus died in 1994, his name has lived on in the cafe. Gus' was heritage-listed in 2011.
A statement of heritage significance at the time said of Gus': "It is not the physical fabric of the building that represents its heritage value. It is the history of the place and activity conducted there over many years that gives the Gus' cafe site its strong historic cultural and social heritage significance for the local community".
The 2011 listing also recognised Gus' was part of Canberra's soul.
"Gus' cafe is strongly linked to the phase of cultural and social development and change in Canberra whereby the perceived 'dead' centre of the city acquired 'heart and soul' through provision of public outdoor, and therefore highly visible, cafe/restaurant facilities as social meeting places," it read.
The Geocon development is being spruiked as "Canberra's first luxury mixed-used building".
It includes the 215-room hotel, offices, bars, cafes, restaurant, club lounge and roof terrace pool.