The proposals would see an abandoned railway tunnel, which runs from Waverley Station to the New Town, used to pipe hot water from Princes Street to residential areas of the city.
The "heat recovery" system would work by capturing the hot air extracted from the buildings on Princes Street and using it to heat pipes of cold water which would feed into heating systems.
It is thought using the Victorian-era Scotland Street tunnel would save laying pipes through much of the city centre. The idea would need the backing of building owners and the heat exchanger infrastructure would need to be installed in shops and the tunnel.
Council officials are currently carrying out a feasibility study into the concept and should know within six months if it is viable. It is hoped the idea can be incorporated into the "string of pearls" revamp planned for Princes Street.
Jonathan Guthrie, the council's city centre partnership director, who created the "string of pearls" concept, said: "There are still a lot of questions to be answered but it wouldn't be too difficult taking the pipes through the tunnel."
The "string of pearls" concept will see the creation of a chain of interconnected developments stretching from Calton Hill to Haymarket.
Princes Street would be divided into sections, such as high street shopping, boutique stores, al fresco dining and a cultural quarter.
The blueprint also includes plans to create new walkways between Princes Street and George Street and turn Rose Street Lane into a shopping alley.
The Scotland Street tunnel took trains from the then thriving ports of Granton and Newhaven to Waverley. Measuring 25ft wide and 20ft high, the passage is a mile long and runs from Platform 19 at Waverley Station under Princes Street, St Andrew Square and Dublin Street.
It then opens up into another tunnel which leads to Rodney Street and Broughton Street.
It has not been used by trains for nearly 140 years and has a variety of temporary uses over the decades, including storing vehicles in the 1960s.
Andrew Arnott, a business advisor with environmental agency Changeworks, said: "This is a very interesting proposal and one which would certainly be on a unique scale.
"Heat recovery is used in industrial settings and I assume the proposal in this case would mean running hot air over the pipes to warm up the water so they would need the space for this.
"It would certainly tick the boxes in reusing wasted heat but also utilising the tunnel as well."