A part of Melbourne's iconic Federation Square will be demolished to make way for a two-storey, multi-million dollar flagship store for tech giant Apple.

Due to be completed by 2020, the project will be Apple's most significant store in the Southern Hemisphere.

It will host workshops, live music and technology classes.

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(A mock-up concept image of the Apple store. Image: Apple.)

The store will take up less space than the current Yarra Building, which will be demolished to make way for Apple.

Victorian Tourism Minister John Eren said the project won’t cost taxpayers anything as Apple will pay all construction costs.

"All Apple wanted from us was access to this very important space," said Eren.

"Our Christmases have come all at once.

(A mock-up concept image of the Apple store. Image: Apple.)

"There are only five of these stores around the world. The only one outside of the US, of course, is Milan and we will be the only store in the Southern Hemisphere."

Once the flagship store has been constructed, Apple will then lease the freehold site for approximately 20 years.

"We’re thrilled that Apple has chosen Melbourne and Federation Square for their new Global Flagship Store," said Eren.

"We look forward to welcoming them as we continue to grow Federation Square as an innovative and exciting place for our community."

(A mock-up concept image of the Apple store. Image: Apple.)

But not everybody is as excited about the proposed development as the Tourism Minister. Early reactions from locals on social media have included a heavy dose of negativity.

"The state government has sold it out to a multinational corporation without any public consultation whatsoever," wrote one user on Facebook.

"It will completely ruin the heritage value of this place, which of course has not been recognised, because no one has had enough foresight to protect it.

"I am disgusted, and furious, and so very tired."

Apple currently has 22 stores in Australia, with the vast majority operating within retail placements in shopping centres.

(A mock-up concept image of the Apple store. Image: Apple.)