Sidewalk Labs, owned by Google's parent company, Alphabet, is to build a digital city in Toronto.
It aims to turn a waterfront area into a working laboratory for a range of "smart" technology.
It is likely to feature fast wi-fi availability, millions of sensors, sustainable energy and autonomous cars.
Technology companies are touting their hardware and software to cities, as urban planners tackle issues such as congestion, pollution and overcrowding.
Public-private partnerships such as the one in Toronto could bring benefits, but cities needed to be sure about what they were getting out of the deal, said Robert Puentes, an urban planning expert from US think tank the Eno Centre for Transportation.
"Cities are trying everything they can to boost their economies and build infrastructure, but they have to realise that companies are not doing it for altruistic reasons - they are interested in generating profit for their shareholders," he said.
"Cities need a clear vision of what they want to achieve, and they shouldn't expect the private sector to do the job for them."
The project in Quayside, which will be known as Sidewalk Toronto, was welcomed by Canada's Prime Minister, Justin Trudeau.
"This will create a test bed for new technologies in Quayside," Mr Trudeau said..
"Technologies that will help us build smarter, greener, more inclusive cities - which we hope to see scale across Toronto's eastern waterfront and eventually in other parts of Canada and around the world."
Former New York Deputy Mayor Dan Doctoroff, who is chief executive of Sidewalk Labs, said: "We believe Sidewalk Toronto can demonstrate to the world how to make living in cities cheaper, more convenient, healthier, greener, fairer, and even maybe more exciting."
Google will move its Canadian headquarters to the redeveloped area, and Sidewalk Labs has committed $50m (£37m) to kick off the project.
Sidewalk Labs has already started smart projects in other cities. It plans to provide fast wi-fi across New York, using old payphones.
But its goal has always been to build a smart city from the ground up.
The Quayside area in Toronto - some 800 acres (3.2 sq km) in total - is one of the largest underdeveloped urban areas in North America.