A plan to build a restaurant, a bar, 20 holiday flats and public toilets on the seafront near the castle has been submitted to Scarborough Council.
The site, in Royal Albert Drive, was home to a café and toilet block until it was demolished in 2017.
The council installed temporary toilets following pressure from residents, holidaymakers and councillors.
Cavendish and Gloucester Properties says it was attracted to the site as its “CEO’s nephew lives and develops property in Scarborough” and they often work together on projects in the town.
The London-based firm says the restaurant has been designed to meet the requirements of an unnamed national chain.
If the plan is approved, the bar will be on the ground floor and the restaurant on the first floor, with a glazed balustrade and views that are not obscured by parked cars.