The federal government has rejected Ontario's proposal to expand Billy Bishop Toronto City Airport, delivering a major setback to plans that would have allowed the Toronto Island airport to accommodate larger jets.

Transport Minister Steven MacKinnon announced the decision on July 24 after the federal consultation period concluded. Ottawa said it would not pursue an expansion that could affect Little Norway Park or Hanlan's Point Beach, increase aircraft noise, create significant environmental impacts or interfere with Toronto's housing plans.

The consultation attracted more than 87,000 responses, making the airport's future a significant public issue in Toronto. The federal government had launched the consultation in June to gather views on transportation, economic development, environmental concerns, noise, housing and quality of life around the waterfront.

The decision puts Ottawa at odds with the Ontario government, which has continued to support airport expansion as part of its transportation and economic-development agenda. The provincial government has said it remains committed to advancing the project.

For Toronto, the decision is likely to keep the future of its downtown airport and waterfront development at the centre of a broader debate over urban transportation, housing, environmental protection and economic growth.