Campaigners urged the council to buy the Brighton General Hospital site to ensure that it was used to build cheap homes for local people.
They presented a petition to Brighton and Hove City Council calling for the site to stay in public hands.
It also asked for a more meaningful and extensive public consultation on the future use of the site and to explore whether it could be used for community beds.
Councillors agreed unanimously to commission a report exploring whether the council could buy the site for social housing.
The campaigners handed out leaflets before a meeting of the full council at Hove Town Hall, urging councillors to charge truly affordable rents for any council houses or flats built there.
Ty Galvin spoke on behalf of the campaign group when presenting the petition to councillors.
He said that the Arundel Building, the former workhouse, was owned by the local authority from 1865.
He said: “We have a great opportunity here for a modern health hub and over 500 council homes on this site.
“This means that it would have to be built with public money.”
He said that the project would cost £50 million which compared favourably he said with the £40 million owed by the company behind the i360.
Council leader Nancy Platts said that she agreed that the land should remain in public ownership for the people of Brighton and Hove.
The Labour councillor said: “I support the aspiration for housing, both affordable housing for social rent and homes for NHS workers.
“I hope we can add to our stock of council housing and ensure affordable homes.”
Green councillor David Gibson, who speaks for his party on housing, urged the council to maximise the number of council homes on the site at lowest possible rents.
He said: “This site was gifted to the city. It is a precious asset.
“We must keep it in public ownership and use it for the people of this city.”
Councillor Mary Mears, who speaks for the Conservatives on housing, said that the site was “complicated” as it was earmarked for a health centre and housing.
She said: “It is an interesting debate to bring to the council.
“There does need to be more detailed discussion around the financial possibilities.”
Councillors voted unanimously to explore the possibility of buying the site.
The petition will go before the council’s Policy, Resources and Growth Committee for consideration at its meeting in October.