Mornane Place. Ever heard of it? Right now it's a dumpster-lined alley running parallel with Bourke Street in Melbourne's CBD.

But by March, restaurateur Guy Grossi hopes it will be a leafy, street art-embellished entrance to his latest project, a yet-to-be-named wine bar behind his flagship restaurant, Grossi Florentino.

Once alive with cafes, pubs and clubs, the now unremarkable back alley is part of the City of Melbourne's Love Your Laneway project, aimed at encouraging residents and businesses to adopt and care for one of more than 230 lanes on the city grid.

"Melbourne's laneways are internationally renowned and have been revitalised with street art, bustling cafes and atmospheric bars," says Deputy Lord Mayor Arron Wood.

The Love Your Laneway project makes grants of up to $5000 available to improve public lighting, footpaths and bin storage, foster recycling and add artwork to bring life back to Melbourne's lanes.

Since 2014, the council has helped a number of hospitality businesses improve their laneways, including Cherry Bar and Pastuso, where street art now brightens walls in formerly seedy AC/DC Lane, and Cookie, which backs on to Stevenson Lane – now home to four worm bins with 40,000 tiger worms munching through food waste.

"When people see how easy it is for our restaurants and cafes to reduce their environmental impact, they also consider the benefits of installing recycling and worm farms in their own homes," says Cr Wood.

In 2013, in partnership with the Victorian Government's Local Government Resource Recovery Fund, the City of Melbourne opened the Degraves Street Recycling Facility, to process the waste from 90 cafes and shops in one of Melbourne's best-known laneways.

The recycling facility, in the basement of Ross House, collects waste from the nearby businesses and processes it using a food waste dehydrator, a cardboard baler and recycling bins. Since opening, the facility has diverted 650 tonnes of food waste and recycling material from landfill.

In Mr Grossi's case, it wasn't until he was looking for somewhere to store wine while renovating Grossi Florentino Grill late last year that he took an interest in the alley literally at the kitchen's back door.

Since taking over an empty shop in the building across the lane, Mr Grossi has come to see the laneway's potential beyond storage.

Enlisting as a Love Your Laneways "champion", he has received a $5000 grant towards leasing a large composting system from "environmental solutions" company Closed Loop, step one in his plan to reduce waste and green the lane. Stage two will be to encourage neighbouring traders to join him in embellishing the space.

He hopes to open the intimate wine bar, serving stuzzichini (snacks) and mainly Italian wines, in March. It's something of a return to form for the dead-end lane – the Clare Castle Hotel, a "wine cafe and tearooms", once occupied the corner of Mornane Place and Exhibition Street before being torn down for an office block.

"I used to think the laneway was boring and blah. But now I want to create something beautiful," says Mr Grossi. "I intend to make it a Melbourne feature rather than just a forgotten laneway."