A planning application will now go in this summer for the £16m Treadmills scheme with construction likely to begin early next year.
Hambleton District Council and the Wykeland Group have formed the Central Northallerton Development Company to drive forward the scheme.
The site will include independent retail units, managed workspaces, restaurants, a cinema, an area for public events and a heritage centre within the 3.5-acre former prison site.
Five listed former prison buildings will be refurbished and incorporated into the Treadmills scheme – whose name reflects that the jail was once home to the world’s largest treadmill used by inmates sentenced to hard labour.
Wykeland Head of Development Jonathan Stubbs said: “We’re delighted to have secured one of Europe’s leading food retailers for Treadmills.
“This announcement reflects the very strong interest we are seeing as we develop the commercial opportunities available and work with our partners at Hambleton District Council to realise the ambitious vision for this exciting redevelopment.”
Northallerton Prison housed prisoners for more than 230 years before closing in 2013.