The tribute would be situated beside his father Robert’s statue in the Joey and Robert Dunlop memorial gardens in Castle Street in the Co Antrim town.
A proposal has been submitted to Causeway Coast and Glens Borough Council.
One of the most popular riders in the sport, 32-year-old William was tragically killed following a crash in qualifying at the Skerries 100 road races in north Co Dublin in July 2018.
A gifted racer, William was a four-time winner at the North West 200 and also won seven races at the Ulster Grand Prix. On the Irish national scene, he chalked up 108 victories and also finished on the podium several times at the TT.
William’s legendary racing father, Robert, also lost his life to the sport in a crash in qualifying at the 2008 North West 200, while his uncle Joey was killed in a racing accident at Tallinn, Estonia in 2000.
Ballymoney councillor Darryl Wilson has given his full backing to the plans, saying: “I welcome the proposal to erect a statue of William Dunlop within the memorial garden, close to where his father’s statue is located.
“The people of the town, the borough and beyond will always hold the members of the Dunlop road racing dynasty close to their hearts.
“This will be a fitting tribute to William and will ensure that the fond memories we have of the man will endure for generations to come.”
The council's planning committee is set to consider the application within the next few weeks.