Real estate firm RioCan announced its plans last week to build a three-storey building that would house a number of stores, including the retail giant.
Dominique Russell, the Kensington resident behind the online petition, says the proposed complex will have a negative effect on the area.
"It will change the character of the neighbourhood," she said.
Russell hopes the petition, which will be presented at a public meeting Thursday night, will send a strong message to city officials.
"There's no knockout punch with the developer. They own the property and they will come back. But I think we really need a strong public response because it can't be allowed to happen," she said.
Coun. Mike Layton said the proposed development already has local shop owners in Kensington and nearby Little Italy concerned.
"If you bring a Wal-Mart that's able to undercut the price, that preys on the other businesses," he told CBC News.
Kensington Market resident Shamez Amlani, who is also a member of the local business association, says that a large retailer like Wal-Mart does not belong in the downtown core.
"It will adversely affect the little Ma n' Pa stores in Kensington Market, the stores that are the backbone of our community, that make Kensington Market so very unique," Almani told CBC's Matt Galloway on Metro Morning.
- Listen to the full interview on CBC Radio's Metro Morning
"And when we start playing around with that, once we lose the uniqueness of Kensington Market, it will be gone forever," he said.
But retail analyst Alex Arifuzzaman argues that Wal-Mart would offer different products and price points than what's already available in the area and that any overlap it may have with the historic market would be minimal.
"Will there be an impact? Yes, there will be an impact, no question about. The retailers in the area will have to evolve and adapt, but I think that it definitely won't destroy it," Arifuzzaman said on Metro Morning.
"Kensington Market is 100 years old and to say that one retailer can destroy a hundred-year-old institution in Toronto is going a little too far," he said.
Even if the city rejects the proposal, RioCan could appeal to the Ontario Municipal Board to reverse that decision. Layton says he hopes to reach a compromise with the developer.
Riocan has yet to comment on the petition, but Wal-Mart says it is paying close attention to the discussion.