Mayor Bill McClenaghan said that leasing the kiosk to Lake House for 21 years was a "win-win".

Cr McClenaghan said Lake House would put in $250,000 upfront to renovate the kiosk, which had been vacant for some years.

In return, the council would offer the lease rent free for 14 years with the final seven years to be leased at commercial rates.

Cr McClenaghan said Lake House was the only applicant for the tender with the council keen for the kiosk to no longer be "sitting idle".

The upfront renovation funding, without including interest, would equal about $1488 per month rent, which was very reasonable for Daylesford, he said.

Cr McClenaghan said the kiosk would provide employment for people in hospitality.

"There was no point leaving it vacant and losing money," he said.

Lake House executive Alla Wolf-Tasker said plans for the building included providing refreshments for visitors to the park and a small cafe.

"We're delighted with the opportunity and looking forward to creating another destination that the local community can be proud of," Ms Wolf-Tasker said.

"The whole team's really excited about the project.

"The gardens deserve a lovely facility and hopefully we'll be able to create that."

Friends of the Wombat Hill Gardens president and council's Advisory Committee for the Botanic Gardens member Gael Shannon said having the former residence inhabited again would bring that area of the gardens back to life.

"If they do a good job, it will also draw extra visitors to the park," Ms Shannon said.

"I think we're poised for really good things in the gardens."