The former United Presbyterian Church in Blackfriars Street, which dates back to 1871, would be restored into an entertainment venue reminiscent of Ghillie Dhu in the West End under plans submitted to Edinburgh City Council last week.
Bruce Taverns, the company that owns fellow Old Town pubs Whistlebinkies, The Globe and the Royal Mile Tavern, is behind the venture.
A retail outlet for traditional Scottish produce would be created on the first floor of the four-storey building under the plans.
The second floor would be turned into a restaurant and whisky-tasting area, while the top level would cater to ceilidh dancing, particularly during the tourist season.
Applicants have stressed the project would be a high-end tourist destination rather than adding to the “tartan tat” shops littering the Royal Mile.
Scotch whisky would be sold alongside local produce such as shellfish and venison.
Bruce Taverns director Kevan Fullerton said the venue was going to be turned into a five-star visitor attraction, not just another pub.
He said: “It’ll be a Scottish cultural experience. It will have ceilidhs and it’ll have the whisky appreciation as well.
“It’s a beautiful building that’s lying there just crumbling down. It’s got a beautiful glass apex in the roof and beautiful features.
“But the project’s at quite a sensitive stage at the moment because there’s no actual legal use for the building in terms of planning permission.”
The B-listed historic property was added to Edinburgh’s register of at-risk buildings in 2006, having been left disused for two decades.
Past plans by the Italian Consulate to turn the venue into an Italian cultural institute, including a small arthouse cinema, restaurant and library, fell through in 2003.
A new stairwell, servery, lifts and food hoists would all be installed under the proposals.
Deputy city leader Steve Cardownie backed the development, saying the Royal Mile lacked a comparative five-star entertainment venue.
He said: “In the Old Town, this would obviously be a valuable addition where tourists could get to experience the authentic Scottish way of life.”
Councillor Jason Rust, economic development spokesman for the Tory group, has campaigned for more independent retailers in the Old Town.
He also welcomed the potential addition to Blackfriars Street “in principle”, adding: “I think things at the higher end of the market in terms of accommodation and hospitality is the best thing in the city centre. If it does help to detract from some of the concerns about tartan tat type shops, then that’s all to the good.”
A council-run meeting of shop owners and residents held at The Hub last year discussed concerns over the Royal Mile becoming over-populated with tartan tat shops.
Bruce Taverns has already commissioned an acoustics report, with plans to install extra sound-proofing measures.
The venue is situated opposite High Street Hostel and between several inner-city flats.
Hostel manager Nino Battersby said: “I’d be worried about all the other neighbours across the street because they regularly complain about people here standing outside and smoking. I don’t know what they would make of a bar, but I’m not too worried about it.”