The Octagon will have two large screens, one in the upper Octagon, where a "family area" will be located, and another in the lower Octagon, which will have a stage for live performances.
The final details, including whether marquees will be used, will be subject to public consultation, but the idea is to have events for certain games with a setup similar to the council's New Year's Eve party.
Despite the zone being a long way from any stadium, Rugby World Cup sponsorship rules mean restrictions will be placed on advertising.
The plan was announced yesterday.
Council marketing communications agency manager Debra Simes said the brief for the fan zone was for a zone accessible to all, with free entry, local entertainment and food outlets, and a family-friendly environment.
There had to be areas for people to eat and drink indoors and outdoors at licensed premises, and areas away from those premises for people to eat and drink where alcohol was not served.
There had to be an area where people could watch matches when the Forsyth Barr Stadium was sold out or when major matches were in other cities, big screens for that purpose, and areas for live entertainment.
The brief also identified the need to minimise the negative effect on the day-to-day operation of Octagon businesses and other affected parties.
The design, therefore, was developed so the fan zone could be set up within three hours and dismantled in two.
Ms Simes said having the zone in place for the entire period of the World Cup was not sustainable.
Traffic would be able to use the upper Octagon, and minimal closures of the lower Octagon and lower Stuart St would occur.
Ms Simes said people who felt the need to drink would be catered for by Octagon bars, which would have outside areas that could extend on to the road.
She expected bars to provide their own big screens.
Cr John Bezett said the council had to be "very careful" the potential of other businesses in the city to benefit from the World Cup was not affected by the fan zone being in the Octagon.
That was one reason it could be set up and removed quickly.
"Those that are concerned can get involved in the public consultation."
An initial list of games for which the fan zone would be set up included the opening All Blacks game, and the games held in Dunedin, but Ms Simes said that was a "very early" draft, and other games, including all All Black games, semifinals and finals, could be included.
The council had to work with Rugby World Cup sponsorship rules, as it had signed a "host region agreement" along with all regions hosting games.
"Yes, there are issues," she said of the sponsorship.
"We're working through that.
"There are rules associated with fan zones for the Rugby World Cup that take into account sponsorships and Rugby World Cup 2011 identity.
"The rules give sponsors the right to be present inside the fan zone."
This meant that while signs around the site for existing businesses was allowed, businesses would not be allowed to put up new, large signs for, for instance, a beer brand that was not the World Cup's official beer.
The council could decide which food outlets were allowed, but World Cup sponsors could set up "as of right".
The fan zone was expected to host between 3000 and 4000 people, but would be sufficiently flexible to handle more.
The budget for the fan zone was expected to be about $130,000.
