A congested spaghetti intersection in Melbourne could be transformed into a pedestrian piazza inspired by New York's Times Square.

In a major redevelopment proposed by urban design firm Alexander Urbanism​, Camberwell Junction would be partially closed and turned into a town square and tram super stop.

The "convoluted" six-way intersection in Camberwell's upmarket shopping strip would be reduced to a four-way intersection of Burke and Riversdale roads, by shutting small sections of Camberwell Road to the north and south of the junction.

The northern 50-metre section would be turned into a town square, with trees and alfresco dining. It is envisaged the space would be used for community events and, over time, become a restaurant hub or "eat street".