Up to four major events a year are proposed for the square under a new masterplan that envisages the Filmhouse becoming its permanent “caretaker” on behalf of the city council.
The square would be divided into different zones for events and shows during the city’s main festivals.
A newly-published masterplan also sets out plans to use the square for outdoor art exhibitions, live performances linked to major film premieres, and expanded pavement cafe areas for neighbouring businesses like Brewdog, the Sheraton and All Bar One.
It is also proposed the new Filmhouse cafe-bar will spill out into the square with a 75-capacity space for outdoor eating and drinking.
The Centre for the Moving Image (CMI), which runs both the existing Filmhouse and the Edinburgh International Film Festival, has agreed a deal in principle to secure the square for its development in return for a “peppercorn rent”.
The new masterplan has been lodged as part of the planning application for the proposed £60 million “temple of film” opposite the Usher Hall.
It is hoped at least 2,000 people will be attracted into the nine-storey complex, which will boast six cinema screens, a glass-fronted restaurant looking onto Edinburgh Castle and a rooftop terrace suitable for outdoor film screenings.
Planned to open by 2025 if planning permission and funding can be secured, the new building is envisaged to be taller than the neighbouring Sheraton Grand Hotel and the Usher Hall.
The masterplan states: “Proposing to build on a public square is a significant proposition and comes with major responsibilities.
"Whilst there is a general recognition that the square in its current form does not work, our proposals will bring about substantial long-term change and must therefore offer a solution that not only improves the square, but which can transform this valuable space into a destination that works for the people of Edinburgh.
"Our proposal is therefore much more than putting a new building on the square and updating the surrounding landscaping. We’re proposing to work with other partners in curating a programme of outdoor events, screenings, performances, exhibitions and other activities on the square.
"We believe Filmhouse would be a great caretaker of what could become a much more inviting and valued public space.
"Whilst Edinburgh typically offers either hard streets and spaces or parks and gardens, we imagine it offering a different experience, a comfortable yet more dynamic public square that people choose to spend time in, meet up with friends or simply wander through, knowing there will always be something to see or do.”
Sandy Begbie, chair of the CMI, said: “The new Filmhouse will be unashamedly contemporary in design, but designed and built for the long term.
"It will be sited within the heart of the city’s cultural quarter, and will be the catalyst that transforms and animates the under-utilised and unloved Festival Square.”