The Horse & Farrier, on Wigton Road, has stood empty for 11 years but work began this week to transform it into a gastro pub with rooms.
It is one of the city's derelict Harry Redfern sites.
Carlisle-born businessman Richard Berry is looking to invest £1.5m in transforming the former Horse & Farrier pub.
He says the gastro pub will be based on another of his businesses – Romneys in Kendal, one of the most successful food-led pubs in the north west of England.
Plans include an extension to the pub and the conversion of the manager’s flat on the first floor into five en-suite bedrooms.
Mr Berry’s group of businesses bought the site – on the corner of Wigton Road and Orton Road – from Tesco about five months ago. The plans would create about 25 new jobs.
Mr Berry, who is now based in the Lake District, is managing director of a Cumbrian-based group of companies whose businesses include the four-star Burnside Hotel and Spa in Bowness on Windermere.
He said: “We are planning to create a fabulous pub selling traditional food and real ales in one of the iconic state-managed Harry Redfern pubs.
“The pub will be based on the concept of Romneys in Kendal, which has been incredibly successful selling good quality locally-sourced traditional food.”
Mr Berry wants to retain the original character of the 1928 Grade II-listed building while offering a “modern twist” for families. As a result, his company has been working closely with conservation officers at Carlisle City Council on the proposals.
Original internal features inside which will be retained include some panelling, fireplaces and doors.
The Horse & Farrier has been closed for 11 years.
Tesco owned the site for several years before the sale in 2017.
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