Market Square will become a 1.5 hectare open space as part of the Queen Victoria Market Precinct Renewal program.
On Tuesday, City of Melbourne councillors considered recent community feedback on Market Square, which reinforced support for transforming the current market customer car park into a new flexible public space that acknowledges the site's rich history.
Lord Mayor Sally Capp said she expected Market Square to become one of the city's premier open spaces and be welcomed by local residents, city workers and market shoppers.
"We want to create a more fitting acknowledgement to the site's history than the current asphalt carpark, and 68 per cent of respondents reinforced the importance of creating spaces for reflection so visitors can consider and respect its history," the Lord Mayor said.
"It's not widely known that the current market car park is located on part of Melbourne's first official cemetery."
The Old Melbourne Cemetery was established on the site in 1837 and was Melbourne's primary cemetery until 1854, with around 6500 burials remaining on the site.
"As part of the renewal program, up to 1000 car parks will be created within easy walking distance of the market," the Lord Mayor said.
Chair of the Arts, Culture and Heritage portfolio Councillor Rohan Leppert said community feedback supported the need for a charter to guide the use and management of the space.
"The creation of 1.5 hectares of new public open space in the CBD is a rare opportunity and we want to make sure we get it right.
"The engagement found 81 per cent of respondents wanted Aboriginal culture to be reflected in the design of Market Square.
"This feedback validates our long-standing commitment to celebrate the site's history and heritage including the Aboriginal custodianship of the land.
"The engagement also found 72 per cent of people want the future space to be used for activities that make people feel included, welcome and part of a community," Cr Leppert said.
The recent community feedback will inform the development of a Market Square charter, which will help guide design of the space, decision making on the use and ongoing management of this new community asset.
The Market Square charter, to be presented to Councillors for consideration in March 2020, will inform the design brief for the open space, including a requirement for robust surfaces and paving treatments in appropriate areas to meet the operational needs of traders and the community.