A LOCAL government review is investigating "significant consolidation" of Sydney councils.
A discussion paper released by the Independent Review of Local Government panel proposes amalgamations to strengthen the capacity and sustainability of local councils.
But critics say merging councils will threaten thousands of jobs.
The review panel was appointed in March to look at improving local government.
Chairman of the review panel professor Graham Sansom said consolidation could enhance the strategic capacity of local government across Sydney.
"The population of the Sydney region is expected to grow to seven million people by the middle of the 21st century. This will place enormous pressure on infrastructure and services and on already stretched government budgets."
The Sydney Business Chamber has advocated cutting Sydney's 41 councils down to 10 "larger, better resourced local government areas".
The Hills Council mayor Michelle Byrne said the review considered how councils should operate in the future.
"The reality is that in 20 years time we won't be working the same way as we do today," Cr Byrne said.
"Local councils are not just lines on a map.
"Any possible amalgamations need to balance out the needs of the community, efficiency and maximise the use of resources."
But critics, including the state opposition and the United Services Union, say thousands of jobs will be lost if the government merges councils.
The union's general secretary Graeme Kelly said merging councils was an attack on "jobs, families and communities".
The discussion paper also outlines running councils like "multi-million dollar companies" and strengthening mayoral powers to deal with code of conduct issues.