The 4.1m package could lead to the disposal or refurbishment of four children's homes, the building of three to five new ones and the leasing of a guest house for residential care use.
Reports have shown that current conditions at the facilities created a poor and stressful living and working environment for staff and young people. Recruitment and retention of carers has also been a significant problem.
No decisions have yet been made about the possible locations of the new homes, but sites have been located in St Fitticks and Cordyce.
In a report to councillors on the community services committee, officers recommended that capital funds available for 2004/5 be used to refurbish existing premises at Gilbert Road, prepare technical appraisals of the possible new sites and lease an existing guest house.