The Hatherton House Stafford South Hotel in Penkridge will become a complex featuring 66 flats under new plans submitted by site owners Shiventures Limited.
The scheme includes the restoration and redevelopment of the Grade II listed hotel building off Pinfold Lane, which will be transformed into 28 flats.
It will also feature three new standalone purpose-built three-storey blocks providing 38 flats.
Under the plans, the existing hotel building will be maintained, while a rectory building inside the hotel dating back to 1831 will undergo a major restoration.
Meanwhile a leisure suite to the south of the hotel will be demolished to make way for the new block.
A statement detailing the scheme, which has been submitted to South Staffordshire Council, says: "The proposal will restore the ‘primacy’ of the historic Grade II listed 'old rectory' building on site, whilst restoring an historic asset and securing the future of the building.
"The proposals will provide much needed housing for the growing town of Penkridge, and will seek to enhance the site with high quality landscaping whilst retaining and protecting existing planting."
It adds that the scheme will "enhance the site by improving the green belt edge, and the entrance into the town, improving and creating sustainable pedestrian links to the neighbouring train station and town centre."
The scheme has been backed by historic building consultants, Donald Insall Associates, who said in a statement: "Whilst causing some localised areas of fabric loss and less than substantial harm the listed building, the proposals also provide the opportunity to partly reveal and restore the building’s historic appearance and carry a welcomed number of important heritage benefits which would only come about in the context of the wider scheme."
Hatherton House was a country club in the 1980s and has been run as a hotel since 1991.