An office building up to 183-metres tall will tower over Cockle Bay after an independent panel approved an overhaul of the inner Sydney wharf precinct, despite concerns the high-rise will cast shadows over a future public square in the city centre.

The City of Sydney opposes the controversial plans to build the commercial tower on the eastern edge of Darling Harbour as part of the $650 million Cockle Bay Wharf redevelopment.

An artist's impression of the Cockle Bay redevelopment, which features a 183 metre office tower, retail precinct and park. Credit:GPT Wholesale Office Fund, AMP Capital Wholesale Office Fund, Brookfield

The council fears the building will overshadow the long-planned Town Hall Square.

But the council's opposition is at odds with the NSW Department of Planning and Environment, which backed the redevelopment proposed by a consortium of GPT, Brookfield and AMP Capital.