Shops will be allowed to stay open until 10pm, seven days a week, without formal approval under sweeping changes to local planning laws proposed by the City of Sydney.
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New residential developments will also need to be designed and built to "manage" noise from an existing venue in a bid to revive Sydney's night life.
Lord Mayor Clover Moore said the reforms were critical to turning around the city's beleaguered late-night economy.
"Unfortunately, the lockouts have had a serious impact on Sydney's cultural life, businesses and our reputation overseas - and while areas like Kings Cross are safer, we know the balance isn't right yet in terms of Sydney's nightlife," Ms Moore said.
The proposals, outlined in a discussion paper, An Open and Creative City, will allow shops and local businesses in Sydney's CBD and other retail areas in Newtown, Potts Point, Surry Hills and Glebe to extend their opening hours with a new development consent from 7am to 10pm, seven days a week.
Another proposal would allow cultural groups to stage small performances, film screenings, art exhibitions and talks - and serve alcohol in limited circumstances - without seeking prior approval.
Research commissioned by the council had found there were limited options after 6pm in Sydney apart from restaurants, bars, clubs and pubs. It also found only 14 per cent of people out in the city after 10pm were over the age of 40.
Ms Moore said people wanted to live in a city with a diverse and exciting night life that had a range of cultural events and activities, including more non-alcohol-based activities opening later to attract families and older people.
"They don't want to live in or visit a city that is unsafe or that shuts down as soon as the sun goes down," she said.
The lockout laws, which took effect in 2014, led to a reduction in assaults inside lockout areas such as Kings Cross and Sydney's CBD, but violence was displaced to areas next to or within easy reach of the lockout areas, according to a report from the Bureau of Crime Statistics and Research.
This includes Ultimo, Surry Hills and The Star casino in Pyrmont, as well as Bondi Beach, Coogee and Newtown.
The council will also seek to adopt the "agent of change" principle to manage the impact of noise.
"Under this approach, a new residential development within 100 metres of an entertainment venue will have to assess the noise from the venue and design and build to manage the noise," the discussion paper states.
"Similarly a new live music venue ... would be required to protect existing noise-sensitive development from the noise it will make."
Ms Moore said the proposed noise rules would also be accompanied by new planning controls and noise compliance guidelines to "improve certainty" for venues and residents.
The city's night-time economy produces an estimated $3.64 billion in revenue, with more than 4600 businesses employing 32,000 people.
Ms Moore said the council had worked to develop the night-time economy before the introduction of the NSW government's lockout laws.
"We've led Sydney's small bar revolution and introduced food trucks, upgraded taxi ranks and improved wayfinding, increased CCTV, developed (and are now implementing) a live music action plan, and funded late night ambassadors," she said.
"We also made a commitment to review the red tape that we are responsible for that impacts the way our city operates after hours."
Previous ideas floated by the council to boost the night-time economy include evening childcare for parents who wanted a night at the theatre and providing micro-loans to assist people to buy musical instruments.
