The Canal & Rivers Trust has objected to the redevelopment due to concerns about the impact on the heritage, character and environment of the area and nearby canal.
Meynell Developments Limited has applied for planning permission to build a terrace of five homes in the garden area of the Talbot Inn in Newcastle Road.
The applicants have recently acquired the Talbot Inn, which is currently vacant.
They plan to bring the public house back into use, while redeveloping the garden area to the north.
Anne Denby, area planner for the Canal and Rivers Trust, said the site is located directly adjacent to an existing boatyard and the proposed houses will be within close proximity to the site boundary.
She said: "The trust is concerned that no formal noise assessment has been carried out and therefore it cannot be established with any degree of certainty that the proposed residential use will be compatible with the existing boatyard.
"It should be ensured that the access is appropriate and the boatyard access is not compromised or any future development hindered by the use of this access by residential traffic.
"The buildings surrounding the wharf, whilst some unlisted, all form part of the historic interest of the site. Any new development should be viewed in this context.
"Considering the adjacent boatyard, it is considered that there may be potential for contamination on the site from previous historical uses.
"Any contamination of the site should be thoroughly investigated and any necessary mitigation/ remediation details submitted for assessment.
"Lighting can have an adverse impact on sensitive ecology and protected species along the canal corridor.
"Therefore, any lighting proposed to dwellings/access road and parking areas should be designed to prevent light pollution."
Market Drayton Town Council have also objected to the plans on the grounds that it will look out of character in the area and over developed.
Julie Jones, town clerk, said: "There is also a possible protection order for the area by the canal, this needs to be checked.
"Soil samples need to be taken as the ground may be contaminated and access issues with the humpback bridge being so close."
In a planning document supporting the application it states: "The site plan shows a terrace of five, two bedroomed dwellings particularly well-suited to first time buyers or older people seeking to downsize.
"The site is well related to the built form of the existing settlement. The proposals would therefore be viewed entirely in the context of existing built development.
"The proposals would not harm the amenities enjoyed by the occupiers of neighbouring dwellings or the safe or efficient use of the highway network.
"The proposals are therefore sustainable in environmental, social and economic terms and are fully compliant with relevant local and national planning policies."