The Canadian government unveiled legislation today that would prohibit the country's two largest newspaper chains from expanding and would create, under federal authority, a national press council to handle citizens' complaints about the press.

The bill, which will be presented to Parliament when it resumes its session in September, immediately was labeled by the parliamentary opposition as an "odious and dangerous" intrusion into the freedom of the press. But its sponsor, James Fleming, minister of multiculturalism, defended the bill by saying, "You can't have a free press if too much is owned by too few."

The English-language daily press in Canada is dominated by two chains, which are scheduled to go to trial in September on criminal charges of conspiring to limit competition arising from the simultaneous closing in 1980 of dailies in Ottawa and Winnipeg. Prosecutors allege that the closings were made in collusion to leave each chain alone with one paper that does not face competition in a market in which they previously had competed.

One of the chains is Southam, Inc., of Toronto, which owns 14 daily newspapers and has about 27 percent of the national daily newspaper circulation. That is equivalent to 33 percent of the English-language market. The other chain is Thomson Newspapers Ltd., also of Toronto, which owns 40 dailies and has about 21 percent of the national circulation, equivalent to 26 percent of the English-language market.

Following the 1980 newspaper closures, the government appointed a royal commission to study the industry, and it proposed a series of sweeping measures aimed at reducing corporate concentration in the media. Fleming has spent two years preparing the government's response. He said the government decided not to break up the two chains because it was expected to cause too much of a fight. However, the proposed legislation would prohibit the chains from expanding further.

The main features of the proposed bill are:

* Newspaper chains with more than 20 percent of Canadian circulation will not be allowed to expand by acquiring papers, starting new ones or converting nondailies into dailies.

* Chains with less than 20 percent of the market will not be permitted to expand beyond 20 percent.

* The Restrictive Trades Practices Commission, the government agency that administers competition law, will be authorized to look into the entry into the newspaper business of any nonmedia corporation and to make recommendations to the government for remedy if publications acquired by these corporations do not have editorial independence.

* A national press council representing newspaper publishers, reporters and the public will be established and financed through an endowment fund.

* The council will be empowered to deal with complaints by the public against daily newspapers that do not belong to a credible provincial or regional press council.

* The federal government will give newspapers grants of up to 150,000 Canadian dollars ($121,500 in U.S. dollars) for the establishment of regional or international bureaus.

Perrin Beatty, the spokesman for the opposition Conservatives, said his party should fight the bill every inch of the way as "the state has no place in Canada's newsrooms."

Comments from Canadian publishers was guarded until their lawyers had finished studying the bill. However, since Fleming announced plans for a government-organized national press council last fall, publishers in Canada have been establishing and joining press-controlled councils that deal with readers' complaints.

Fleming indicated that he may withdraw the bill's provisions giving the national agencies power to hear grievances if he is convinced the publisher's councils are credible. Even so, the national council, which would be endowed by the government with up to 20 million Canadian dollars ($16.2 million U.S. dollars), will still be created and will be empowered to conduct research into the industry.