Birkwood Castle in Lesmahagow, Lanarkshire, is a Gothic mansion and ex-family home, which dates from 1860.
It was once used as a hospital for mentally-disabled children before closing in 2002.
But now the residence could be brought back to life in a £50million project by property tycoons Chris Naylor and Jo Lloyd.
The developers plan to regenerate the 86-acre Birkwood estate with the castle as a focal point, and say they will build lodges and log cabins.
Claims have been made that the building houses the ghosts of some of its former patients, and has even featured in televised paranormal investigations.
A number of people have reported eerie goings-on in the castle down through the years, with most of the stories involving sightings of ghostly children.
A boy called Michael is said to stalk the grand spiral staircase where he fell and a young girl’s voice has also
been heard crying and singing from within empty rooms in other parts of the castle.
Visitors and staff at the former hospital also reported smelling phantom cigar smoke, electrical disturbances and mysterious footsteps.
And it has even been claimed the figure of a doctor who suffered a heart attack and died while working at the hospital has been seen at windows.
Last year ghosthunters Glasgow Paranormal Investigations filmed an episode of their series Haunted Planet TV there with the crew saying it was one of the most active locations in which they had filmed.
The land has belonged to Jo Lloyd since 2012, while the Naylor family bought a 50% share of the project last year.
Chris said: “Our family and the Lloyds have been friends for a few years and share the same entrepreneurial drive.
“When I heard about Jo’s plans for Birkwood Castle they excited me and I knew it was a project we would love to get involved in.
“We’ve been in discussions over the past 12 months and are extremely excited that both our families will be working together to form the perfect partnership in making Birkwood a success.”
Delays brought about by the property crash meant previous redevelopment work could not go ahead but plans are now ready to go before South Lanarkshire Council.
Jo said: “It’s been extremely difficult in terms of funding and there’s been a huge amount of work we have had to do with professional reports.
“I imagine the locals will think that the project has fallen through as to look at the site there has been little structural change.
“There has been a lot of work carried out already that people are unaware of and we are now on the way to driving things forward.”
Details of the development plans will go on show in Lesmahagow between Wednesday and Friday next week.
Planning permission will also be sought from South Lanarkshire Council with a decision expected in around three months.
If granted, work would be carried out in stages over several years, although the castle redevelopment would begin immediately.