And the council has unanimously voted to ask the Local Government Inspectorate to investigate a leak to The Age this week of the details of its secret market development deal with PDG.

On Tuesday, ahead of this week's council meeting, The Age revealed that only PDG was left in the running to develop a high-rise tower on land bought by the council in the market precinct.

Despite it having been confirmed as the developer by a confidential vote of councillors on Tuesday night, the council will still not publicly detail its negotiations with PDG.

Traders at the market had a win on Tuesday night, with the council deciding to keep fruit and vegetables in the lower market area near the deli section. Previously there were plans to move them to the market stalls at the market's upper end near Victoria and Peel streets.

Under the plan that went to the council this week, PDG will develop underground parking for 720 cars, 56 affordable housing units, a 120-place childcare centre, a community centre, artist studio and a gallery.

It would be paid $50 million if it succeeded in getting approval from Planning Minister Richard Wynne for the high-rise tower, or up to $80 million if it did not get planning approval.

Preliminary plans for two towers - both appearing as shaded areas in this illustration - next to the Queen Victoria Market, presented earlier this year by Melbourne City Council. 

Speaking at the market on Wednesday, Lord Mayor Robert Doyle confirmed a developer had been selected, but declined to say which one it was now negotiating with.

"We still haven't finished negotiating with that preferred bidder. The moment that contract is inked we will make it public," he said.

He said any development on the "Munro site" opposite the market deli hall, near a McDonald's on Elizabeth Street, should not "overcrowd" the area.

But he said there was "room for a reasonably tall tower … away from the market but we would want to step down to a relatively small podium at the market end so we are not overshadowing [it] in any way".

Drawings produced for an independent planning hearing earlier this year into the precinct indicates a tower of more than 60 levels near Elizabeth Street, and another nearby on Franklin Street.

Preliminary plans for a tower next to the Queen Victoria Market, presented to Melbourne City Council earlier this year.

Cr Doyle said that the 72-storey tower built by the Brady Group on the site of the old Stork Hotel opposite the market in Elizabeth Street, was "probably too high".

While the selection of PDG was decided by councillors in secret on Tuesday night, a unanimous public vote asked the Local Government Inspectorate to conduct an investigation into the source of the leak to The Age on the market development plan.

Cr Doyle said the leak was "one of the most sensitive documents that we will handle".

"It's about as bad a leak as I've seen in my time here at the City of Melbourne," he said.