City mayor Sir Peter Soulsby says he hopes to resolve a long-running row over the lease of a former Scout hut before Christmas.
For months, some residents of Thurnby Lodge, Leicester, have been protesting against Muslim community group As-Salaam's plans to take over the disused building in Nursery Road.
They have been gathering outside a nearby community centre used on a daily basis by worshippers from As-Salaam.
A residents' group, The Forgotten Estates, said it would like the building to be open to the wider community, not just Muslims.
The Scout hut is on council-owned land.
A debate was held at the Town Hall on Thursday, triggered by the submission of a 1,500-signature petition against As-Salaam's plans.
Mohammed Lockhat, spokesman for As-Salaam, said: "I would urge you to finalise the lease with As-Salaam as a matter of urgency as your delay only serves to increase tensions within the community."
Mr Lockhat told the council As-Salaam members were regularly harassed and intimidated by the protesters.
He handed over a 3,700-name petition supporting the group's takeover of the Scout hut.
However, it was not formally accepted as it only carried certain details of the signatories.
As-Salaam said people were too afraid to add their full details.
Sir Peter said: "I do hope this can be bought to a speedy solution.
"I would hope that it will be resolved before Christmas."
He acknowledged the difficulty of the situation and thanked the representative of both As-Salaam and The Forgotten Estates for taking part in discussions with him.
A proposed package has been drawn up, though details have only been released to interested parties.
Forgotten Estates spokeswoman Maxine Williams, of the Stirrup Cup pub, said the group's committee did not condone the intimidation of As-Salaam members.
She said after the meeting: "I can understand how they feel.
"It can be intimidating but any protest like this will attract a certain element. We want the protests to be peaceful and amicable."
She said the group had been raising money and was now in a position to take over the Scout hut lease.
It would aim to use it for a boxing club, dance groups and as a gym.
