Three community members raised the possibility to boost shopping in the centre of town, given work on a supermarket on the edge of the business district.

They include Camilo Demarco, who wrote to the council to say the town square would be placed outside the Market Building.

"This would be the central gathering space we do not currently have, and that we believe would bring this town together," he wrote in remarks read out when councillors gathered on Tuesday night.

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"We have seen this work during festival time and from many anecdotal conversations with community members there is a strong desire to see this as a permanent feature of this town."

Other letter writers urged councillors to weigh in on the new idea and fuel a wider conversation.

They highlighted arguments town squares brought more people on foot to nearby shops and a space for visitors to gather that showcases Castlemaine's heritage buildings.

The trio also pointed to research on the mental health benefits of people socialising in such spaces, at a time when society was battling an "epidemic of loneliness".

"What we believe is missing is a thorough community conversation to hear the true voice of what residents need and want in this space," Mr Demarco wrote.

Mayor Tony Cordy discussed the proposal when councillors gathered on Tuesday night.

"I think there are some good ideas there," he said.

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The shire would need to deal with another project before its officers could launch into any potentially detailed thinking, though.

The shire's acting director Jude Holt said council officers' current priority is on detailed designs for the Frederick Street precinct, where upgrades could soon help pedestrians and cyclists better share the space with cars.

"Noting that we don't have a huge resource pool that can focus on multiple projects at the same time, we do need to continue the work for Frederick Street at the moment," she said.

Part of Frederick Street was turned into something of a town square as the shire tried to help attract people into town during the COVID-19 pandemic.

The virus has prompted councils worldwide to experiment with gathering spaces, including in Bendigo where some car parks and traffic lanes have been closed to give restaurants extra space to fit customers.

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