The proposal - to be considered by city councillors next week - would see funding for construction of the cycleway, seawall and road-widening project removed from the council's budget until 2015-16.
The idea was among cost-saving initiatives put forward by council staff as part of 2012-13 pre-draft annual and long-term plan budgets, to be considered by councillors from Monday.
The result would mean completion of the 11 remaining stages of the project - together worth $27 million - would be pushed out beyond 2023.
Spokes Dunedin spokeswoman Erika Buky said her group would be "disappointed" by any delay, which would leave cyclists negotiating traffic on parts of Portobello Rd for years to come.
Stretches of the peninsula cycleway, running along the edge of the road, had so far been built around population centres, leaving gaps in between, she said.
"[Portobello Rd] has got fast-moving traffic and many people find it very intimidating to ride on, and yet it's supposed to be one of the 10 best bike rides in the world."
Dunedin was already "lagging behind" other New Zealand cities in the development of cycling facilities, and had seen several recent examples of crashes involving death or injury to cyclists, she pointed out.
Ms Buky - who lives on the peninsula - said her group would make a submission to the council's annual plan hearings calling for work to continue.
The group would also urge the council to focus on linking the unconnected parts of the network as a priority, she said.
Cr Andrew Noone - chairman of the council's infrastructure services committee - told the Otago Daily Times the delay was a cost-saving initiative suggested by council staff.
However, it also came after continuing uncertainty over the availability of New Zealand Transport Agency funding for the project.
The NZTA subsidy made up about 65% of the project's cost, but the agency had previously indicated it was unlikely to keep funding the project - and others like it - at the same level, because of new priorities and limited funding, he said.
Without it, the council faced the choice between delaying work or amalgamating separate stages into one, to try and meet the NZTA's new funding criteria, he said.
However, that would mean bringing forward the council's share of funding for later stages, piling up costs - and increasing rates - in earlier years.
"The appetite for council to go ahead with those [cycleway stages] without NZTA funding is something we're not prepared to entertain at this point.
"For those next stages to go ahead, we would really like to secure the NZTA funding. At this point, if we can't secure it, we're basically saying we want to hang off two or three years just to make sure we can afford our contribution, and we can make sure we can secure that external funding."
Work on the cycleway had already been delayed a year, after initial uncertainty - later resolved - over the NZTA's funding for the now-completed Vauxhall to Doon St stage.
That meant no new work was undertaken during 2011-12, and the delay could now be extended, Cr Noone said.
The council's pre-draft budgets showed work resuming in 2015-16, with up to $2.5 million a year allocated from then, including a reduced NZTA subsidy of 50%.
Cr Noone said council staff had assumed the subsidy would be reduced based on NZTA signals that subsidy levels would drop in the intervening three years.
