The proposals at Fort Richmond, on Guernsey's west coast, have been made by the Treasury and Resources Department.
If successful it intends to put the site up for sale as part of a larger plan to sell off unused buildings.
Funds generated from the sale of the fort will be added to the capital reserve, which funds States' projects.
The fort, which never saw action, was used for social housing before World War One.
Helen Glencross, historic sites curator, said: "The building has been neglected for quite a long time, it hasn't been in use since the 1980s.
"It was built at the same time as the barracks at Fort Hommet and Fort Le Marchant, but this is the only one that remains standing.
"A lot of original features remain inside... and certainly the external appearance will have to be respected."
Fort Richmond
"It's been in a state of dilapidation for years and it does cost money to maintain the property, even in its current state, so that's not really good use of public funds," said Deputy Tony Spruce, chairman of the property services sub-committee.
He said it was unclear how much money could be raised by the sale as it depended on what plans were approved, if a move to include the site on the open market register was passed and the housing market.
Plans to convert a Victorian barracks into residential accommodation have been announced.