This follows a proposal by the railways' property arm, Intersite, to sink sections of the railway line between Cape Town station and Woodstock below ground level, cover the line and create an additional three million square metres of development space.
In a statement, the city's communications department said the proposal was "welcomed" by the mayoral committee for further investigation.
"The proposed project dovetails with the city's promotion of compact, integrated development along a major transport corridor. The fact that most of the land is owned by Intersite/PRASA, makes it less complicated than dealing with multiple landowners."
It said the draft plan, unveiled earlier this week, included the creation of four precincts - in Salt River, Woodstock, the Foreshore, and the Castle/Grand Parade area.
Proposed was a "mixed-use development with economic innovation at its core, fast and efficient public transport and a substantial contribution to the central city's housing stock".
According to the statement, senior officials would "facilitate further feasibility studies" and submit a report to the committee - detailing the proposals financial sustainability and clear timeframes - in May this year.
Earlier this week, Intersite said it had based its proposal for Cape Town on the same urban-regeneration model followed by Barcelona, and had asked the city to award special status to the project and to facilitate the acquisition of rights.
Just R20 for the first month. Support independent journalism by subscribing to our digital news package.