The state's transport agency has walked away from an agreement with the Inner West Council to help fund a feasibility study into running track-free electric trams along Sydney's Parramatta Road.

Despite signing a memorandum of understanding in August, Transport for NSW said it had decided soon afterwards that committing to a detailed study of only one option for Parramatta Road would "pre-empt the outcome of our strategic planning process".

That process culminated in the release of the government's 40-year transport plan last month.

Under the deal in August, the lead agency and council had agreed to stump up $80,000 each for a study on how guided track-free trams could run along the Parramatta Road corridor linking Sydney's central business district to Burwood.