The lane decides first
A laneway suite is a detached dwelling at the rear of a lot that fronts onto a public lane. Whether you can build one is, before anything else, a question about the lane rather than about your property.
The lot has to abut a public laneway, and the lane needs a minimum 3.5 metre frontage. A private right of way is not a public lane, and a lane that has never been assumed by the City is a different thing again.
If the lane does not qualify, the answer is not no. It is a garden suite, which needs no lane and is reached from the street through the side yard.
How big it can be
The size limits work the same way as a garden suite: a cap in the by-law, and a smaller number that the geometry of your actual yard produces once every setback binds.
Rear and side setbacks, separation from the main house and an angular plane measured from the lot line all apply at once. On a narrow downtown lot, which is where most qualifying lanes are, the tightest of those usually decides the footprint long before the cap does.
Laneway or garden suite
They are close enough that people use the terms interchangeably, and the City does not. The practical differences are worth keeping straight.
A laneway suite fronts a public lane. A garden suite does not and cannot rely on one.
A laneway suite is usually on a narrow lot in an older part of the city, because that is where the lane network is.
A garden suite is available across most residential zones, which makes it the broader of the two options by a wide margin.
If your lot has a qualifying lane you can generally consider either. If it does not, only one of them is open.
What rules one out
The lane failing to qualify is the common one. After that, the same layers that govern any Toronto lot apply: heritage listing or designation, a conservation authority's regulated area, and site-specific exception clauses attached to the property.
Servicing and fire access are site conditions rather than mapped data, and they are decided at permit rather than by the zoning. A lot can be zoned for a laneway suite and still fail on access.
Worth sayingThis is a plain reading of published requirements, not legal or planning advice, and it is not a substitute for the by-law text or for the City. Requirements change, and a site-specific exception can override any of it on your particular property.