The venture is the idea of the Duchess of Rutland.
She aims to transform empty workshops and offices in the Belvoir Castle Engine Yard into units for about 12 businesses.
She hopes the retail village will be a magnet for tourists, showing off some of the best of British wares and produce and generate income for the Belvoir estate.
The village, which will offer more than 12,000 sq ft of prime retail space, will be anchored by a farm shop, restaurant/winebar, plant centre, bicycle hire shop and a health and beauty spa.
Refurbishment of the buildings is about to start and it is hoped the village will be open next Easter.
But the Belvoir Estate is already looking for suitable businesses to move into the village.
Estate commercial director Grace Milham said the cost of the refurbishment was a “significant” one.
Rents at the three acre development, which is close to the castle, will vary from £10,000 to £35,000 a year.
Mrs Milham said: “The estate has been considering options for these buildings since 1999.
“We had considered residential development but we want to make Belvoir a tourist destination and hope to create a fuller day out for people who come here.
“It is an opportunity for growing businesses to market their products on a prestigious site with the associated branding of the Belvoir Estate.”
Darren Joint, chair of the Grantham Business Club, said: “It is good to see an innovative use of empty premises.
He added: “I think it is a sound idea to look for businesses that will encourage people to stay for a lengthy time and that offer services that can’t be provided online.”
The redevelopment of the Engine Yard is part of a programme of works on the estate to bring disused areas back into use.
Recent projects include refurbishing the estate’s residential properties and the Capability Brown project, carried out with TV gardening expert Alan Titchmarsh, to complete a long lost landscape design by the 18th century landscape genius for the castle grounds.
Any businesses interested in setting up at the Belvoir Castle Engine Yard should contact Mrs Milham on 07824567736.