Taylor, a two-time Academy Award winner who died March 23 at age 79, was known for her striking beauty -- particularly her lavender-tinted eyes, Lori's Diner spokesman Barry Barsamian said.
The restaurant therefore decided it was fitting to honor Taylor by displaying her 1950s lavender tulle dress at its Union Square location at 500 Sutter St., he said.
Barsamian, a Hollywood historian who is also the marketing director for Lori's Diner, is loaning the dress to the diner from his personal collection.
"Lori's Diner highlights lots of memorabilia," he said. "We have a 1959 Ford Edsel, jukeboxes, vintage Coke machines. It's like a blast from the past from the 1950s."
The shimmering sleeveless dress "screams Elizabeth Taylor," he added.
"We thought it was a nice way to honor probably the biggest film star of the 20th - and 21st - century," he said. "Who doesn't know Elizabeth Taylor?"
Taylor's lengthy career included roles in "Giant," "Cat on a Hot Tin Roof," "Butterfield 8," "Cleopatra," and "Who's Afraid of Virginia Woolf?"
Her dress will be on display at the diner for at least three months, Barsamian said.