The proposals, which would potentially curb trading to 11pm across sections of the city's eat-street and riverside areas, are an attempt to grapple with the fast-growing residential density of central Parramatta.

But they have received a strong reaction from hospitality interests in the area, who say they risk undermining investment and diminishing Parramatta's appeal as a place to go out.

"They're basically saying you can't have nightlife, entertainment at Parramatta - it's absurd," said Alex Aslan, the managing director of ALEX&Co, a cocktail bar and restaurant recently opened by the Parramatta River on Church Street. "You just have cafes."

The proposed policy, which might be voted on by City of Parramatta councillors on Monday night, would break the central core of Parramatta into a "late-night trading area" and a "city living area".

Within the late-night trading area, larger venues would be restricted from trading past midnight unless they had an exemption, and smaller venues would be restricted from trading past 1am unless they had an exception. Within the city living area, venues would be restricted from trading past 11pm without an exception. An earlier version of the policy had proposed a 10pm restriction.

Many of Parramatta's night spots and restaurants, including ALEX&Co, sit within the city living area.

The policy would not apply retrospectively, but would potentially kick in if a venue made a development application.

For John Perkis, who has owned Parramatta's historic Woolpack hotel for the past 21 years, the measures would mean he would be reluctant to make further investments.

"I don't know what the bank would say when we said, 'by the way we might get our hours cut back down for this'," Mr Perkis said.

The Woolpack operates under a 24-hour licence. But a future development application would potentially trigger the proposed policy, leaving Mr Woolpack's business exposed to an 11pm closing time.

"Fifteen years ago Parramatta's night-time trade didn't exist," Mr Perkis said.

"Things are pretty good now, but council just seems to want to put the brakes on it," he said.

The policy, according to papers prepared by council staff, would "set expectations for current and new stakeholders such as business operators, and residents".

Its stated aim is to "balance the need to protect amenity while promoting a vibrant night-time economy".

Business operators, however, argue that if there are increasing noise conflicts between residents and venues in central Parramatta, developers should be required to better insulate buildings.

David Borger, the western Sydney director of the Sydney Business Chamber, said people needed to come to Parramatta in the knowledge that it would be a busy area.

"We've got to accommodate that as a city and not be a nanny state that tries to put people in slippers by 10pm," he said.