Rumuors this week that a segment of the Wall would be torn down to make way for a block of flats were confirmed by Franz Schulz, mayor of the city's eastern district of Friedrichshain, daily Die Welt wrote on Tuesday.
Meanwhile, several petitions circulating online demanding an end to the project have collected thousands of signatures.
"The longest remaining part of the wall on the former death strip, along with the public river bank would be completely and permanently destroyed," read one petition, placing the blame squarely on developers of luxury flats.
The East Side Gallery is a 1.3-kilometre stretch of the Wall marking the former border between East and West Berlin. Now covered in murals by artists from around the world, it is the second most popular visitor attraction in the German capital after the Brandenburg Gate.
Some estimates put the average number of visitors at 1,000 a day, while up to 10,000 people are thought to walk along the former death strip on the banks of the Spree River on sunny days in summer.
Several years ago, a 50-metre segment of the Wall was removed to provide access to a boat landing area for the o2 arena opposite, and moved so that it now stands between the water and the rest of the Wall.
Now, construction is due to begin this spring on "Living Levels," a 63-metre-high tower to be built on the narrow stretch of land between the Wall and the river bank.
Several further concrete segments will be removed to provide access to the 36 new private luxury flats, which will be sold for anything between €2,750 and €7,000 per square metre.
But, said Schulz, the segment of Wall also needs to go so that pedestrians can make use of a new bridge to be built across the river connecting East and West Berlin.
Work is expected to begin in 2015 on the new "Brommybrücke," which will connect Kreuzberg and Friedrichshain for cyclists and pedestrians. It will be built on the site of an old vehicle bridge of the same name which was destroyed by bombing in 1945.
Tearing down part of the Wall, Schulz told the paper, is the only "way to link the planned Brommy bridge over the Spree with Mühlenstraße."
Vocal protests from citizens groups against the plans to develop the Spree bank have been backed by nearby giants of the Berlin clubbing scene, including Kater Holzig, Sage Club, Watergate, Tresor and Lido.