The RACV has suggested closing part of Elizabeth Street in Melbourne's CBD and turning it into a shopping mall to increase safety for motorists and cyclists.

The motoring body says two blocks could be shut between Flinders and Bourke Streets.

Brian Negus, the general manager of public policy at the RACV, says the area does not have a lot of traffic and could be better used as a residential and shopping block.

"Give it over to pedestrians, cyclists, trams passengers and trams and make it a really good place to be, with street furniture," he said.

"Improve it like the malls in Swanston St and Bourke St and have that central city mall complex."

Mr Negus says the move would increase safety for pedestrians, cyclists and tram passengers.

"We've heard from Yarra Trams that there's lots of incidents between cars and trams and also from Bicycle Network, (that there have been) bicycle problems in that area as well," he said.

"So we can improve the area and make it safer for cyclists and for pedestrians, trams and tram passengers."

City of Melbourne Councillor Cathy Oke says the council has already begun discussions with Yarra Trams about the idea.

"I think Elizabeth Street is the next great opportunity for the city in terms of making it a great space for pedestrians, as well as the many public transport users," she said.

"It's a great discussion to start."