Derby's Silk Mill could be mothballed for two years as part of plans to transform the city's museums.
Stuart Gillis, Derby City Council's head of museums, said the city's potential needed to be realised with a reorganisation of its museums.
Further plans include setting up a charitable trust to run Derby Museums.
The money saved from the closure of the Silk Mill will be used to transform it into a major visitor attraction specialising in science and technology.
Mr Gillis said the move was not a direct reaction to the forthcoming budget cuts but "it's within the context of finances being very, very difficult".
He added: "We know the potential of this city and the story of the city's heritage just isn't being told in the way we're doing things at the moment.
"We need a radical new plan to transform the way that we do that."
Plans will also see the Joseph Wright Gallery refurbished, Pickford's House established as an international centre for promoting the work of Derby-born painter Joseph Wright and museum collections taken into the community.
The proposals will be considered by Derby City Council Cabinet on 26 October. If approved, work will begin in early 2011.