Councillor Jimmy Kavanagh (FG) said such a facility would attract huge numbers of motor-home tourists to the town.
A recent gathering of motor-home enthusiasts at Donaghey Motor Homes near the Dry Arch in Letterkenny attracted almost 500 vehicles to the event.
Cllr Kavanagh says that a ready-to-use site which offered parking, toilets and electrical points could be a huge benefit for the town.
“There are a huge number of people using motor-homes to tour around the country – both from abroad and from Ireland.
“We have to make them feel welcome when they come through Letterkenny and try to encourage them to stop here and to spend a couple of days here.
“These people buy groceries and visit restaurants and it could be a huge area of revenue for the many businesses in the town,” he said.
“These tourists are on the road practically all through the summer and in general are more interested in sightseeing, than they are on lying on the beach, and for that reason would be happy with a stop over in town or on the outskirts of town.
“Catering for this type of tourism is a hugely popular on the continent and in the States and is becoming more and more popular in Britain and Ireland.”
Cllr Kavanagh said he has not broken down the costings but he said any costs could easily be put against any potential revenue from tourists coming into the town.
“Sure we have sites in the vicinity of the town which would lend themselves to this kind of facility.
“Obviously it will probably not happen before this summer but I can’t see any reason why we cannot have it up and running and advertised by next summer,” he said.