Geocon has been given the green light for its 11-storey Garema Place hotel development.
As part of the approval Canberra's first alfresco dining restaurant, the heritage-listed Gus' cafe will be demolished but it will be rebuilt in the same spot.
Geocon said it would work with the ACT government to maintain the heritage of the site. The heritage-listing for Gus' relates to the look, feel and atmosphere of the site rather than the physical build.
The hotel will have more than 200 rooms, a rooftop pool and bar and a ballroom function room.
It will also include groundfloor restaurants and cafes, commercial space and 2500-square-metres of office space.
Geocon managing director Nick Georgalis said he was pleased to see the hotel progress.
"This hotel will define the city centre, transforming Bunda Street into a modern and inviting destination which people from outside of Canberra are excited to visit," he said.
It was the third proposal put forward by the construction giant for the site at 70 Bunda Street since it bought it for more than $13 million in 2017.
A first proposal had plans for a 16-storey hotel but this drew the ire of the ACT Greens who said the height of the building would cause "long-term damage" to the city.
Geocon amended the plans and scaled back the development by five storeys. This proposal was approved.
It did not go ahead as the developer submitted a third proposal after it bought an adjoining site.
Geocon plans to start construction at the end of 2020 with the hotel to be fully operational by 2022.
Alongside the Garema Place hotel, Geocon has four hotels in the pipeline.
"Geocon has embarked on a journey to bring a series of five-star hotels to Canberra," Mr Georgalis said.
"We began that journey last year with Midnight, a Marriott Autograph Collection Hotel in the heart of Braddon. This new approval allows us to move onto the next piece in our plans, the Canberra City Luxury Hotel at Garema Place."
"These two hotels will complement our future hotel plans - West Block in the Parliamentary Triangle, which will set a new benchmark for luxury accommodation in Canberra as well as our fourth luxury hotel in the Kingston Arts Precinct, a project we have partnered with the ACT Government to deliver."