Federation Square's southern building will be demolished and replaced with a flagship store for tech giant Apple, which will bring an extra 2 million visitors to the square every year, according to the Victorian Government.

Under a plan that has been negotiated for more than a year, the three-storey Yarra building will be bulldozed and a two-storey Apple concept store built in its place.

The design will also open up the square to the riverside, and architects say it will create 500 square metres of extra public space.

Work demolishing Federation Square's southern building will begin in 2019. ( ABC News: Richard Willingham )

An artist's impression shows increased public space next to the planned store. ( Supplied: Victorian Government )

The global giant said the store would be one of just six concept stores in the world, and its first in the Southern Hemisphere.

Federation Square lead architect Donald Bates has been involved in the planning.

"Apple Federation Square respects and expands on the original vision for the site, with more public space, extensive landscaping and better access to the river allowing more people to enjoy this renowned civic, cultural and commercial hub," Professor Bates said.

Victorian Tourism Minister John Eren said the centre would bring an extra 2 million visitors to the square every year.

Work is scheduled to begin in 2019 and finish in 2020.

Melbourne Greens state MP Ellen Sandell said the public would feel angry about a cultural space being handed over to a multinational commercial company.

"Federation [Square] was built as a cultural place for all of the public to enjoy, not as a commercial shopping mall," she said.

"Victorians will rightly be asking themselves why this Labor Government continually lets our public space be taken over by corporations and private developers.

"We don't know what deals or incentives were done here."

She also accused the State Government of ramming through planning approval with no public consultation.

The Koorie Heritage Trust, which is housed in the southern building, said it would most likely relocate in mid 2019.

It said it would move to a larger space which would allow more room to offer services and to keep its collections of Koorie art and artefacts.

Before: Federation Square's southern building blocks the square from the Yarra River. ( ABC Radio Melbourne: Simon Leo Brown, file photo )

After: The Apple flagship store will replace Federation Square's southern building. ( Supplied: Victorian Government )

Federation Square was opened in October 2002, after an international design competition was held to generate ideas on how to redevelop a new civic space in the city.

A year after it opened, it won five major awards for architectural and design excellence.

Apple would not say how much construction would cost, nor how much rent it would pay to Federation Square, saying that was a commercial matter.

The Government said it would create 250 construction jobs and a further 200 ongoing positions.