There were concerns that the mural, The Mild Mild West, which shows a teddy bear about to hurl a petrol bomb at riot police, could be lost when the block in Bristol was made over.

Instead it is to be incorporated into the new development and will form the centrepiece of an atrium with an organic cafe. The mural, one of Banksy's most celebrated, will be protected from the elements and attack from vandals by glass.

Gavin Carpenter, of Connolly and Callaghan, which owns the building in Stokes Croft, said the atrium would be open to everyone. "I think people assumed the worst when they heard about the development. They thought the mural would go. But Banksy is very much the man of the moment and this will bring some kudos to the development."

Banksy has a huge local following, and The Mild Mild West took almost half the vote in a recent BBC poll to find the city's favourite alternative landmark. The development in Stokes Croft has yet to secure planning permission. But one city councillor said having a Banksy mural was a good way of deterring graffiti vandals. Gary Hopkins said: "Where there is good quality street art, other graffiti does not tend to encroach. That's why we commission various murals around the city."

Meanwhile, it emerged yesterday that rare prints by Banksy worth nearly £10,000 were stolen in two raids on an art gallery in Brighton last month. Thieves broke into Art Republic and snatched 10 pieces of work which police believe were stolen to order for a dealer or collector.