Christchurch City Council has purchased a 378m2 piece of land from the Catholic Diocese, which owns the city block bordered by Manchester, Armagh, Colombo and Oxford streets.
The Press reported the council paid $1.985 million for the land after the diocese had approached it about making the purchase.
The diocese has subdivided the site and offered the council a 12m wide lot directly opposite New Regent St for a laneway.
A laneway in the area was first raised in 2012 as part of the Christchurch Central Recovery Plan.
"This is a really great opportunity for us to connect New Regent Street to the promenade," Christchurch Mayor Phil Mauger says.
"This street is such a unique part of our city, and now we can continue the vibrancy of the area while providing opportunities for hospitality activities on both sides of the laneway."
Rob Farrell, who is the advisor to the Bishop, said the block was now "surplus to our requirements".
"With the decision to build our new cathedral back on our historic home on Barbados Street, this block is now surplus to our requirements and (the) remainder will be strategically divested over the medium to long term," Farrell said.
"The diocese is delighted that the city has made this purchase to extend such an iconic street."
New Regent St is home to Tākaro a Poi Margaret Mahy playground, the Performing Arts Precinct and Rauora Park nearby.
Mauger said the investment will be the starting point for further development in the area.
"Christchurch is already the country’s coolest city - and we’re just getting started.
"Expanding areas like New Regent Street will help bring businesses into the area, visitors to the city, and embrace the river more which is a key part of our identity."
He said the extension will require careful design to make sure pedestrians can cross Armagh St safely, especially where the tram turns.
The cost of building the new laneway has yet to be determined, with funding to be included in a future Long Term Plan.
Maintenance costs will also need to be factored into the council’s operational budget.
