Tamworth Regional Council (TRC) has pushed for residents to live closer to the CBD, in some cases atop retail shops on Peel Street, in the hopes it will spark the region's night-time economy.

But, a Department of Planning, Industry and Environment (DPIE) discussion paper on changes to employment zones could threaten that, Cr Glenn Inglis said, as it sets out what councils can and can't do in their CBD and one suggestion is not to have residential living.

"As far as Blueprint 100 goes and if Kable Avenue is deemed a CBD locality, that could be a real problem for us," he said.

"It's not saying it's going to happen, but it is suggested as a course of action so I think it would be good for all councillors to get an update on where that's heading because it's something we might want to have a strong say about."

The reform is intended to ensure employment zones are fit for purpose, support job growth and increased productivity, according to the DPIE discussion paper.

It argues that the existing mechanisms councils use to support the night-time economy and shop-top housing in centres will continue.

But, Cr Juanita Wilson wasn't convinced.

"If that proposal goes through it would absolutely be devastating for us - because we need to bring life and community back into the CBD," she said.

"It's a catalyst for kick-starting our night-time economy and the community is ready and buzzing.

"We seem to be on the cusp of it and to have external legislation that comes in that seems completely irrational really needs to be contested, we need to be wide awake with the impact this could have on us."

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The employment zones framework is expected to be complete by mid-September, public exhibition closed in June.

Mayor Col Murray said it came as a surprise.

"Our regional cities right across NSW are pushing back against this," he said.

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