A significant restoration project worth than $1 million has overhauled the scenic but storm-damaged and run-down Shepherds Hill Cottage at the top of King Edward Park.

City of Newcastle is now seeking community feedback on a lease for the site, which could include a cafe and kiosk, before calling for expressions of interest for operators.

Council will seek through a development application to expand the kitchen and add extra bathrooms.

"Over the coming year we will see a lot of action on this site in terms of having this beautiful site activated and back open to the public," lord mayor Nuatali Nelmes said.

"For this site, it is exceptionally unique, you have about 270 degrees worth of views from south down towards Dudley and beyond, and all the way around to Nobbys and through to Stockton beach and around the western side of the cityscape.

"I'm hopeful that we'll see an operator up here by summer."

Shepherds Hill Cottage has a storied history, overlooking Newcastle since the 1890s.

It was struck by wild weather in 2015 which caused significant damage. Cr Nelmes said only one room had been usable before the storm hit the run-down military site.

"This is a beautiful heritage asset and we've worked very closely with the community as well as Heritage NSW given the state listing of King Edward Park to really carefully restore this cottage," Cr Nelmes said.

"A lot of these beautiful assets in our park lands, like this particular unique heritage cottage, having them restored is a significant investment."

The cottage sits on Newcastle's iconic Bathers Way walk which was designed to connect Nobbys and Merewether.

Cr Nelmes said a cafe and kiosk with outdoor areas and seating inside the heritage cottage would make the perfect stop for visitors and locals.

Shepherds Hill Cottage housed the Marine Rescue NSW Newcastle base between 1997 and 2015, when the storm forced a relocation, before the organisation was permanently moved out.

The crew found a temporary home at Warabrook before moving into a purpose-built facility at Stockton last year.

The cottage also overlooks the historic Shepherds Hill Observation Post Complex which played a key role in the defence of Newcastle during World War II.