TORONTO—A unit of Alphabet Inc. said its proposed “smart city” in a Toronto neighborhood would create thousands of jobs and cut greenhouse-gas emissions, but met some resistance from the project’s government sponsor over the scope.

Alphabet’s city-building unit, Sidewalk Labs LLC, won a bid in 2017 to build a sustainable neighborhood on Toronto’s waterfront and on Monday unveiled its first detailed plans for the project.

Initially billed as a neighborhood built “from the internet up,” the project calls for using sensors embedded in traffic lights and garbage bins to track residents and respond to their needs. On Monday, Sidewalk proposed using buildings made all of wood to cut down on construction-based emissions, sidewalks that expand to create more room for pedestrians after rush hour, and a thermal grid that uses sewers, factories and server farms to provide heating.

Sidewalk said it could invest as much as 1.4 billion Canadian dollars (US$1.06 billion) to build the neighborhood, seed an innovation institute and venture-capital fund supporting local startups, fund a timber factory outside Toronto, and finance the expansion of Toronto’s light-rail transit. If all its plans come to fruition, Sidewalk said it could create 44,000 jobs in the region and build 35,000 housing units, 40% of which would be below market rates.

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The initial details revealed on Monday met resistance from Sidewalk’s government sponsor, which needs to approve the proposal.

Sidewalk’s plans go beyond the scope of the project initially proposed by government organizations, said Steve Diamond, the chairman of Waterfront Toronto, a Canadian government entity that selected Sidewalk as a partner for the project in 2017.

“There are proposals where it is clear that Waterfront Toronto and Sidewalk Labs have very different perspectives about what is required for success,” he said.

Mr. Diamond said Sidewalk’s bid was limited to a small 12-acre parcel of land on the waterfront named Quayside. The company acted prematurely on Monday by proposing that the city look beyond that limited area to create a 190-acre district incorporating ideas developed in the smaller section, he said.

Mr. Diamond also questioned Sidewalk’s demands that Toronto expand its transit network in a bid to make the project viable.

“They are also not commitments that Waterfront Toronto can make,” he said.

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Dan Doctoroff, Sidewalk’s chief, said in an interview that he wasn’t surprised by Waterfront Toronto’s comments. “It would be ridiculous to assume every issue would be resolved,” he said. “They have questions and concerns and I think that’s entirely appropriate in their role providing oversight.”

Waterfront Toronto will now consult with the public and government authorities and negotiate details with Sidewalk. The plan will need final approval by the boards of Waterfront and Alphabet before proceeding, which could happen as early as 2020.

The Toronto waterfront development is Sidewalk’s biggest project since the business was launched in 2015 by Mr. Doctoroff, a former investment banker who became deputy mayor for economic development in New York City and then chief executive of Bloomberg LP.

Waterfront Toronto announced the undertaking in 2017 at an unveiling attended by Canadian Prime Minister Justin Trudeau and Alphabet’s then-executive chairman, Eric Schmidt.

After the initial fanfare died down, Sidewalk ran into opposition from local residents, concerned by how the company, with its ties to Google’s parent company, would handle data.

Privacy watchdogs questioned who would control sensitive digital information as residents are tracked by sensors. Also at issue are ownership rights over any products or techniques developed at the site and sold elsewhere.

To address the privacy and intellectual-property issues, Sidewalk proposed to create an independent data trust, sanctioned by government bodies, to oversee the collection and use of sensor data. The company also won’t sell personal data or use it for advertising, a spokeswoman for Sidewalk said. “Of course, this is a proposal that government can choose not to implement, and our commitments would remain,” she said.

Some critics feel that Sidewalk’s proposal goes too far in recommending changes to governance structures. “It’s not their job to do this. This is supposed to be done by government,” said Bianca Wiley, co-founder of Tech Reset Canada, an advocacy organization. “Sidewalk Labs is coloring outside the lines.”

A Sidewalk spokeswoman said the data trust was proposed to respond to critics who said they wanted to see Sidewalk Labs’ ideas for data protection. The company has also committed not to sell personal data or use it for advertising, she said. “Of course, this is a proposal that government can choose not to implement, and our commitments would remain,” said the spokeswoman.

The company also proposed that Waterfront Toronto and Canadian federal, provincial and municipal governments would get 10% of profits for 10 years from intellectual property developed in the neighborhood.

The company said it would move Alphabet’s Canadian headquarters to the area to act as an anchor tenant.

Click here for more from The Wall Street Journal, where this story was first published.