Indigo Council is in talks with horse riders who are banned from rail trail reserves about how they could use the $6.2 million Beechworth to Yackandandah link.
As planning ramps up on the 31 kilometre extension to the Murray to Mountains Rail Trail, 1780 people have signed a Change.org petition to have council change their Local Law 5.
It states a person must not ride a horse in the Murray to Mountains Rail Trail reserve, unless the council has set aside an area for that use.
Infrastructure director Ian Ellett said there were no immediate plans to review the bylaw, but council were in talks with the horse-riding community on the issue.
"We don't want to displace them," he said.
"East of Yackandandah, towards Osbornes Flat, there's a section at the moment utilised by horses and we recognise if we build the trail and ban the horses, that leaves them nowhere to go.
"We need to understand where those situations are ... and better understand the risks and consequences.
"We're likely to have some sections where horses are able to use the cycle trail."
Horse riders do currently use the rail trail reserves, which in areas can be as wide as 30 metres.
The new cycle path will have a two-metre-wide all-weather seal, and in some flood-prone areas will be reinforced concrete or asphalt.
Mr Ellett said council could not open the conversation up "too broadly" to all potential users of the trail.
"It's not trying to be everything, for everyone," he said.
"It's funded as a significant project by the state government and council, aimed at being an optimum cycling product.
"There's learnings there from other trails, like the High Country Rail Trail from Huon to Tallangatta; there are some sections where horses typically don't use it, but they might use a bridge and reconvene.
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"The conversation with the horse-riding community hasn't been, 'We want horses on the trail from A to Z', it's been particularly about where they're riding horses now.
"We'll be able to find a solution that is a win-win."
The rail trail's route is largely locked in, but a survey is currently running on the council's website on its direction through Yackandandah.
"We held community drop-in sessions last Friday as part of the Yackandandah Placemaking Plan to get some good engagement happening," Mr Ellett said.
"We want lots of people to be able to spend their money in town; we don't want to bypass it."
The trail starts at Billson Street in Beechworth, heads to Wooragee through the Magpie Creek Historic Reserve, follows Beechworth-Wodonga Road to the new roundabout intersection with Yackandandah Road, and extends past Yackandandah to the Osbornes Flat Primary School.
It will be built in seven sections over three years.
Mr Ellett said the sections one, two and three, that were scheduled to be completed in 2019 were all running on time.
"We've tendered recently for sections one and three; Peach Drive to Kibell Lane and out of Beechworth and also the Wooragee area," he said.
"We're hoping to award a contract in coming weeks, so that we'd be undertaking those works in Spring.
"Yackandandah to Osbornes Flat is getting ready for tender."