The Deputy Prime Minister made the announcement during a recent visit to the city.
The move comes as part of the ongoing drive to rebuild parts of the city that were afflicted during floods at the beginning of last year.
The ideas competition consists of a loose brief to 'guide the future uses' of the Rickergate area of the city centre.
These will form part of wider proposals spearheaded by the council-led regeneration organisation Carlisle Renaissance.
This wider 'renaissance' includes plans for new university buildings, including a library; the creation of a new criminal justice centre; and the demolition of the city's bus station to make way for shops.
The council is working with the RIBA Competitions office on the Rickergate project.
RIBA president Jack Pringle said: '[Carlisle] Council understands that high-quality design is a vital ingredient in this unique opportunity to create a wonderful new area for Carlisle.'