The winner will be decided by an online public vote which closes on 30 June - and SKDC is calling on people to #voteDeepings at ramblers.org.uk/vote
Walking group the Ramblers nominated the area because of the Deepings Green Walk Standard, adopted by Market Deeping Town Council and Deeping St James Parish Council, encouraging all new developments to include "safe, accessible, attractive, linked" footpaths.
The annual award celebrates areas which create green and welcoming walkable neighbourhoods, supporting increased physical activity, as well as the health, social, economic and environmental benefits that brings to people and their communities. Last year's winner was Hastings Old Town.
SKDC cabinet member for Health and Wellbeing, Cllr Robert Reid, said: "This nomination is welcome recognition of everyone's hard work to promote walking in and around The Deepings, and will help keep it a great place to live, work and visit.
"This is an outstanding walking neighbourhood and is easily accessible with plenty of variety for all to enjoy riverside, country or urban walking.
"Improving people's health and wellbeing is a key objective for SKDC, so please join us by supporting The Deepings with your online vote."
Announcing the finalists, The Ramblers recognised the local councils' plan to create The Deepings Green Walk, a 15km circuit to link local facilities, housing and green spaces. It is a key part of The Deepings Neighbourhood Plan which all new development will be expected to support.
Pam Byrd, of the Deepings First Neighbourhood Plan group, said: "This came from the Neighbourhood Plan process, where instead of deciding where housing and industry should go, we looked at the green space and pathways first, the environment and the community, and then worked other things around that.
"I would encourage everyone to give The Deepings the best chance to win by encouraging their friends and family to get online and vote."
Local rambler Peter Jackson said: "I've done walks around the Deepings and it is a beautiful place to walk around, with a lot of different environments. It's very calm, very safe, and there are some beautiful views to be seen and paths to tread."