The proposal is that the Council hand ownership of the building to the surf club, along with $350,000 towards the cost of repairing and earthquake-strengthening it.
Mayor Prendergast said: "Throughout our deliberations over what to do with the building since the fire, the overwhelming message from the public is that the building should be saved.
"This proposal will allow the building, which is a Wellington icon, to not only be restored but to belong to the surf club, its occupiers.
"I would like to pay tribute to the Council team, who have worked incredibly hard on this issue since the fire. They have considered all possibilities before arriving at a solution they believe is best for the building, the surf club and the wider community."
Mayor Prendergast said the club has agreed to the terms of the proposal, which will be considered and voted on by Councillors next Thursday.
Maranui Surf Lifesaving Club chairman Peter Clark said: "We believe this is the right way forward for the club.
"It gives us more control over our destiny and, given the level of public support and interest shown in the building, this is a great way that the building can be safeguarded and the surf club can maintain its close relationship with it."
The heritage-listed Maranui building in Lyall Bay was gutted by a fire on 1 August. The cost of repairs was estimated at up to $750,000.
The Council has been looking at a range of scenarios for the area and assessing the current and potential uses of four seafront buildings.
Under the current proposal, ownership of the building will be transferred to the Maranui Surf Club and an appropriate ground lease will be agreed.
The proposal states that the building will be restored within 18 months of the date of transfer.