The proposed space, part of the Central Square scheme near Cardiff Central rail station, would see the St David's House building on Wood Street demolished.
Three fully-let office buildings and a transport interchange, including office and residential units, have already been given the go-ahead.
Cardiff council's cabinet discussed the public space plan on Thursday.
Councillors gave the authority permission to dispose of leasehold interest in land north of Wood Street to enable the 270,000 sq ft (25,083 sq m) office block and square to be built.
The proposal will also include a new office development, which could accommodate 3,000 jobs, on the site of the old Western Mail and Echo building on Park Street.
The new BBC Wales Cymru headquarters, at the heart of the new Central Square development, is already under construction while a new transport hub has been given full planning permission.
Council leader Phil Bale said: "As anyone can see, the transformation on the south side of Wood Street facing the railway station is well under way with the BBC Wales HQ and No 2 Central Square beginning to take shape alongside No 1 Central Square which has been open for over a year.
"Now there are some really exciting plans coming forward for the north side of Wood Street on the old Western Mail and Echo site, which has been empty for several years, and on the St David's House site which fronts Wood Street."
Councillor Elizabeth Clark, leader of the Liberal Democrat opposition on Cardiff council, said: "The Labour run Cardiff council need to provide more detail on the use of the public square.
"For example, how will pedestrians, cyclists and the proposed metro be accommodated? It's important to get all this right."
A new public square has been proposed as part of plans for the next phase of Cardiff city centre's regeneration.