The new road should reduce congestion in the city
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Land valued at £2.5m may be handed over to help plans for a bypass to ease congestion in Carlisle.
Carlisle City Council's executive has agreed the proposal in principle to transfer land to Cumbria County Council for less than market value.
It would support the progress of the Carlisle Northern Development Route.
The government is considering a bid for more Private Finance Initiative (PFI) credits for the scheme and it is hoped work will start by the end of 2007.
The views of city councillors will be sought before a final decision is made to the full council to recommend the plans for the transfer of the seven acres.
Important factor
If the transfer is agreed, the decision will be referred to the Secretary of State.
The city council will write to the county council to call for discussions on a reciprocal agreement over any land that may be needed for the Carlisle Renaissance plans.
City council leader Councillor Mike Mitchelson said: "The Carlisle Northern Development Route is undoubtedly one of the biggest and most important contributory factors to Carlisle's long-term well being - economically, socially and environmentally."
The county council said it was hoping ministers will look at the bid for extra PFI credits for the road scheme over the summer and it would then go before the Treasury in the Autumn.
It said: "If the Treasury approve our bid for extra PFI credits, the county council will then go back to bidders to get revised tenders with a view to work beginning on the CNDR sometime towards the end of next year."