Gunnedah shire councillors have voted to amend the current alcohol-free zone declaration to allow for drinking in outdoor dining and alfresco areas.

The town's alcohol-free zones themselves will remain unchanged for another four years, but pubs and cafes will be now able to apply for outdoor licensing.

But, operators must have the relevant approvals under the NSW Local Government Act, the NSW Roads Act and with Liquor and Gaming NSW.

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Deputy mayor Rob Hooke said because there were so many COVID-19 restrictions inside buildings, the changes would increase the "opportunity to have a viable business with alfresco dining outside".

"It gives them the opportunity to expand their business, because with the four square metre rule you can only have so many people in a dining facility," Cr Hooke said.

"It would open it up to another one or two tables spending on the size of the area they're proposing to make.

"Potentially, that could increase their business by 20-30 per cent and that's enormous."

Gunnedah Shire Council's community and social planner Deborah Hilton wrote in the September council papers that other conditions included the hours of operation and the size and location of the defined area.

Meals must also be served if alcohol is being consumed.

"Due to current COVID-19 Health regulations, pedestrian access between the licensed premises and outdoor dining and alfresco area must be sufficient to ensure 1.5m physical distancing between pedestrians and dining patrons at all times," Ms Hilton wrote.

Alcohol-free zones have been in place in Gunnedah for more than 14 years and are a crime prevention and community safety initiative to reduce binge drinking and alcohol-related assaults in public spaces.

They are reviewed every four years and the current zone declarations remain in place until 30 June 2024. Penalties apply for infringements.

The recommendation was put to council after consultation with stakeholders including the Gunnedah Liquor Accord, the Crime Prevention Working Group and other councils.