The Templar Lodge Hotel in Gullane has been repeatedly targeted by vandals after going out of business nine years ago, to the dismay of local residents.
Now award-winning architect Lorn Macneal is seeking to transform the site, turning the hotel into 14 homes and building two new houses in its grounds.
The bid comes two years after another proposed development of the hotel by Murray Holdings was put on ice due to the credit crunch.
The hotel has a colourful history, with stonework thought to date back to the 12th century. The building has also been used to film a documentary about UFOs after reports of mysterious lights in East Lothian.
Mr Macneal said: "The previous planning application was for ten flats in the lodge and seven town houses in the grounds. But the recession has meant people are having difficulties in raising funds for speculative developments. Instead, we are looking at creating 14 properties in the lodge from one to four bedrooms, and only two speculative houses in the grounds.
"The properties would suit a range of people, from those looking to retire to young couples seeking somewhere to commute to Edinburgh.
"At the moment, the hotel is a blot on the landscape. Every window is broken and it suffers from dry rot. That's very sad because it's a wonderful building."
Mr Macneal declined to divulge the cost of the proposed development, but added that he hoped the project would get under way in April if planning approval is given.
The hotel itself was thought to date from the 18th century, until hidden staircases, fireplaces and stonework were found 12 years ago.
Workmen found stonework dating back a further 600 years. Experts now believe the building was a home to the Knights Templar who fought crusades in the Middle Ages.
George Fraser, chairman of Gullane community council, said Mr Macneal had a meeting with his fellow councillors to outline his plans before the proposals were submitted.
He said: "The site has been lying empty for too long. We hope that the right architect is now involved and, on the face of it, the plans look promising.
"The local authority had wanted to keep the site as a hotel rather than lose a tourism amenity, but nobody was able to make it work."