Lord Mayor Sally Capp said the new design will seek to reduce the amount of flooding during heavy rain and storms.
"Elizabeth Street was once a creek that flowed into the Yarra River and it has been the site of major flooding throughout Melbourne's history," the Lord Mayor said.
"We have seen how quickly and severely the weather can change this summer and we know the trends indicate that we will experience extreme weather events more frequently.
"Intense storms lead to increased flash flooding and Elizabeth Street remains a low point in the catchment so we have worked closely with authorities while designing this project."
A planning permit for the project is now being advertised. Work to pedestrianise and improve the area between Flinders Street and Flinders Lane will begin mid-year, with the project expected to be complete in late 2020.
"Along with reducing the flood risk on Elizabeth Street, we will extend the footpaths, plant trees and increase the pedestrian space by 400 square metres – the size of a basketball court," the Lord Mayor said.
"This will reduce congestion access around key public transport interchanges at Flinders Street Station and the Elizabeth Street tram terminus."
Changes will include the closure of the southbound traffic lane to make way for a new public space, installation of a new underground drain network, footpath upgrades, and new street furniture, lighting and paving.
"The corner of Elizabeth Street and Flinders Street is one of the busiest pedestrian intersections in the CBD, with up to 9,000 people pounding the pavement per hour during the morning and afternoon peaks," the Lord Mayor said.
"Pedestrians outnumber all other street users on Elizabeth Street but have the least amount of space."
Between 2004 and 2015 there was a 65 per cent decline in the number of motor vehicles using Elizabeth Street. Motorists will still be able to travel along Elizabeth Street in a northbound direction between Flinders Street and Flinders Lane.
City of Melbourne crews continue to clean the Elizabeth Street area several times a day while Victoria Police conducts regular monitoring and patrols.
For more information about the Elizabeth Street Streetscape Improvement works visit: melbourne.vic.gov.au/cityprojects
Significant floods in the area include:
- 1891 – The Yarra River swelled to 305 metres in width, causing at least one death and thousands of people to be left homeless;
- November to December 1934 – Torrential rainfall of up to 350mm causes the Yarra to become a raging torrent, leaving 35 dead, 250 injured and 3000 homeless;
- February 1972 – A massive downpour leads to cars being almost completely submerged on Elizabeth Street;
- 4 February 2011 – A severe rainstorm causes flash flooding and disrupts transport.