Anthony Goh, spokesman for Pentridge site owner Shayher Group, said the new Adina Apartment Hotel will "offer guests the chance to stay in a historic converted prison cell" as "a unique accommodation experience".

He said some other cells will be retained in their jail-era condition and be re-opened for community viewing.

How the prison looks now, and an artist's impression of what it will look like. Photo: Penny Stephens

The bulk of the 120 apartment-style hotel rooms will be housed in nine levels of a 16 storey tower Shayher wants to build on vacant land next to the heritage listed bluestone cell block in Pentridge's south-western corner.

The tower will also contain six levels of residential apartments and a communal facilities level including a restaurant, day spa, conference facilities, an indoor pool, gym and parking.

The existing B Division prison chapel, with high leadlight windows, will become a functions area available for weddings and other events.

Robert Cogoi inside the former Pentridge B Division chapel, which is set to become a function centre. Photo: Penny Stephens

Before it closed in 1997, B Division contributed its share of infamy. In 1993, Paul Steven Haigh was found guilty of murdering fellow inmate Donald George Hatherley by hanging and choking him a cell in 1991. In 1996, a 23-year-old prisoner was bashed in his cell in the same block.

In 1950, convicted murderer Robert Walker tried to take prison staff hostage using a smuggled hand gun, but shot himself after a shoot-out. And in 1965, Ronald Ryan escaped from B Division – he was said to have fled with criminal partner Peter Walker over the back wall of the exercise yard. Ryan and Walker were later recaptured and in 1967 Ryan became the last man hanged in Victoria.

The proposed 16 storey tower follows a 19 storey and nine storey complex already planned for the site's south-eastern corner, which Coburg resident protesters in December said they feared would herald a forest of apartment towers.

Moreland Councillor Sue Bolton, a member of the Pentridge Community Action Group, said letting people stay in cells was treating Pentridge "like a theme park". And she said the new tower's height would "totally overshadow the heritage buildings".

Mr Goh said the entire B Division project would be built in a way "that fuses the jail's heritage with sensitive contemporary architecture".

Mr Goh said planning had been influenced by United States and British re-adaptions of jails "into beautiful accommodation, paying tribute to the past by repositioning them for the future".

Rachel Argaman, chief executive of hotel operator, TFE Hotels, said locals and visitors from overseas would be intrigued to learn about Australia's penal past, and hotels were a great way to preserve heritage-listed buildings while "allowing unique and memorable experiences for guest who learn and experience aspects of that rich past".

The hotel and residential development is expected to open in 2020, subject to planning and heritage permits.

Mr Goh said an important consideration in the hotel design was "to ensure the burden of the ongoing costs associated with the heritage is manageable for future residents and tenants".