The city’s licensing committee will decide whether to approve applications for five premises.
Two are facing objections from Police Scotland and officers have also urged councillors to question what kind of activities are going taking place at a further three.
Police said there was no direct proof that sex was being offered for sale at the premises, but that officers found items such as stocks of condoms and pornographic magazines.
The saunas are listed in the council report as Carol’s Sauna on Easter Road, London Street Sauna in the New Town, Ambassador Sauna on Lothian Road, Tollcross; No Eighteen on Albert Place, Leith, and Steamworks on Broughton Market, New Town.
Edinburgh is the only local authority in Scotland which has issued public entertainment licences to saunas since the 1980s.
Owners are not asked in detail about the nature of their operations when they apply, with Lothian and Borders Police tolerating such an approach over several decades.
Advocates of the scheme say workers are protected in licenced premises and not forced to work on the streets.
In contrast, Glasgow has historically had a zero-tolerance policy and Strathclyde Police regularly raided suspected premises.
Ms MacDonald said: “I would urge councillors to do as they think best for Edinburgh and I imagine they will draw heavily on our experience over the past 30 years to manage the sex industry.
“If the members of the committee take a realistic view of this trade then I’m sure they will allow our successful model to continue.
“No one wants a sauna or brothel next to their house or office, but people in Edinburgh know that licensing the sex trade is better than police raids after which women end up on the streets.
“Few cities in the world have ever managed prostitution better than here in Edinburgh. And it’s nonsense to suggest that zero tolerance will deliver anything but unsafe working conditions and the spread of sexually transmitted diseases.
“I have no objection to the police having stipulations and penalties on licences, but a small minded approach isn’t going to deliver better public health or safety for these women.”