If Dublin possesses a major thoroughfare, it could be argued that this is not O'Connell Street but Dame Street.

Opened to its present extent by the Wide Street Commissioners during the 1770s, Dame Street was specifically designed in the 18th century to lead from the seat of government - Dublin Castle - to the building which then served as home to the nation's parliament.

O'Connell Street, on the other hand, was never intended to serve any major civic purpose but simply evolved into its present substantial form over a long period.

Neither route, of course, has managed successfully to hold onto its former dignity, but perhaps Dame Street has fared the better of the two, thanks in part to a multiplicity of financial institutions which have lent it an air of dignity. But for almost 30 years, there has been one noticeable gap along the street, of considerable importance because of its location next to City Hall.

Running as far as Palace Street - which offers pedestrian access to Dublin Castle - this site was allowed to fall into dereliction and then cleared by the corporation in the 1970s as part of yet another subsequently-aborted street-widening scheme.

In 1988, as part of the city's millennial celebrations and in an unsatisfactory attempt to disguise the resulting eyesore, a garden was installed using a number of 19th century statues and some fussy planting. And so it has remained until now.

Finally, in the coming year the local authority plans to address this problematic space in a more satisfactory fashion. The most obvious solution would be to restore the former building line along both Dame and Palace Streets but the city architect Jim Barrett insists that this should not occur because it would obscure the eastern elevation of the recently restored City Hall and, facing it across the western side of Palace Street, the side of the neo-Romanesque AIB bank running towards the gates of Dublin Castle.

Of course, the response to this argument is that both views were never intended to be seen from any distance, since each was originally designed when the adjacent streets were still intact and narrow.

Barrett in turn argues that, having been exposed, what becomes apparent is that "as they now stand, the two elevations warrant greater status than they were originally given." He believes that the "fairly strong" corner of the AIB building ought not be concealed and that the corporation "primarily wants to retain the views" opened up by the park.

In any case, such a discussion has to remain academic because it transpires that when turned into a park in 1988, the site was legally designated as a public space, meaning that the corporation cannot now cover it with new structures. "We could build under, but not over it," says Barrett.

Actually, the concept of building down was given serious consideration by the local authority's architectural office until certain other difficulties became apparent. One of these was the presence of remains from the old city's wall and surrounding moat, while the other was the fact that the River Poddle follows a line through the site on its way to join the Liffey. The plan to create a large underground exhibition chamber below the present park therefore had to be jettisoned.

Above ground, on the other hand, an entirely new vision for the space has been proposed. The scheme comes from the city architect's own office working in association with Spanish practice MBM Arquitectes. Based in Barcelona, MBM can claim most responsibility for that city's vibrant renewal over the past 20 years; it helped that one member of the triumvirate whose initials make up the company's name, Oriol Bohigas, was Barcelona's delegate for urban affairs for a number of years in the early 1980s and at a later date a councillor for culture.

MBM was responsible for the design of Barcelona's 1992 Olympic Village which revitalised the city's old docklands area, but the practice has also worked extensively elsewhere in Spain and Europe.

Jim Barrett says he was attracted to MBM "because of their urban design strength as much as their architectural skills" thereby emphasising that the redevelopment of this corner is not just about filling in gaps in the streetscape.

In particular, precisely because the site has to remain a public space, a more satisfactory means of incorporating it into the surrounding environment had to be devised. In Barcelona, MBM has demonstrated imaginative skill in this area, capable not just of designing entirely new structures but also of providing solutions to small, land-locked sites every bit as tricky as that on Dame Street.

What is envisaged for Dublin, therefore, is that the park become a plaza, with the present statuary and grass removed - the former belong to the OPW and are due to be returned to that organisation - and a new, predominantly hard surface space created instead. At the back of the plaza, a line of trees will mask the rear prospect of the houses which lie inside Dublin Castle. Until now, the untidy appearance of these buildings only added to the temporary appearance of the park, but skilful planting will do much to disguise them, aided by the installation of a wooden screen at the lower level.

Breaking up what might threaten to be a rather bleak and rainswept space - our climate, after all, is not comparable with that of Barcelona - a configuration of square granite seats is planned. How much these will be used is open to speculation; the site, after all, is north-facing and receives little sunlight.

The original notion of developing downwards has not been forgotten either. Towards the plaza's rear, a window set into the ground will give views to a small underground chamber; without public access, this will probably have some Joycean theme associated with June 16th, its design to be decided by an open competition.

The other major element of the intended £3.5 million (4.44m) scheme is a new building which will abut on the north gable end of the former Sick & Indigent Roomkeepers Society building on Palace Street - the only surviving 18th century house on this row.

Because Jim Barrett is keen to keep the prospect of the AIB bank clear, the planned block will not be large, extending only some eight metres along the street and running back 12 metres into the plaza. Rising four storeys over ground floor, it will therefore extend to less than 950 sq m.

Despite this relatively small size, the building ought to make a strong impression thanks to a number of distinctive features. While the ground floor will be finished in granite, the storeys above facing east and west are to receive a sheeting of the same stone which has been given a composite reflective glass surface. To the east, the facade will be broken at each level with a small balcony.

Meanwhile, the northern front's upper floors will be of painted wood with glazed windows, the whole set behind a ventilated space screened from the exterior by a wall of glass. Two other details of the design are sure to draw comment, the first being a meeting room set on the roof of the building and rising up to form a half-dome, the whole covered in a silver mosaic. The other is a steel gantry which will jut out from the block's top floor and carry spots to floodlight both the plaza and City Hall. "It's theatrical," confirms Jim Barrett, "and intended to be so."

Work on the site is expected to begin late next summer and should take a year or so to complete, which means the new building is unlikely to be ready for occupation before autumn 2003. The corporation's ambition is to lease the structure to a commercial tenant, a scheme already operative elsewhere in the city.