Members of the council's Planning and Building Standards Committee will be recommended to dismiss the application for a supermarket and five business units on the Tweedbank Industrial Estate when they meet on Monday, March 7.
The committee will be told that the store would be five times the size of the Co-op just five minutes drive away and "will have a devastating impact on it and knock-on impact on Melrose footfall".
The "impact on Melrose will be severe and negative and Galashiels and Selkirk will also be affected", the report adds.
But the vast majority of representations received have welcomed the 35 new jobs the supermarket would create, the "cutting of the need to travel to Hawick, Kelso, Galashiels and Melrose", the benefit to the Borders General Hospital and other villages and its potential to take Tweddbank out of the "dark ages" in terms of its limited existing amenities.
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The supermarket giant is making its bid as part of a multi-million pound development near the Borders Railway terminus after Premier Inn dropped out.
It had been hoped a hotel could be part of the Borders Gateway project at Tweedbank.
In his report to next week's committee council planning officer Carlos Clarke says: "The retail development will potentially be of significant benefit to the residents of Tweedbank and immediately surrounding areas. The business units are a welcome addition to existing business floorspace.
"However, the retail unit would not be located within or adjacent to the town centre; would compromise the loss of valuable employment land within an established business park location and would potentially lead to harm to Melrose town centre."
Lidl has been signed up by the company behind Tweedbank's redevelopment, Edinburgh-based Manor Place Developments, whose managing director Duncan Hamilton has described the discount retail giant as a "great addition" to the plans for the area, which include a new petrol filling station and a Costa drive-thru.
Lidl GB's regional head of property, Gordon Rafferty, said: "Our exciting plans are to create around 35 jobs which would be fantastic for the local area, delivering our high quality and affordable produce to even more of the community."