Possibly signaling the end of the $14 billion public and private plan to remake the area around Madison Square Garden and Penn Station into a premium office and residential district, Garden officials yesterday unveiled a $500 million renovation plan for the 40-year-old arena.

The proposed renovation to what has been dubbed the “world’s most famous arena” would add 68 new mid-level luxury suites, create floor-level luxury suites, remake the upper level with a new “party deck” for fans, add two new restaurants and additional restrooms, more than double the square footage of the interior lobby on Seventh Avenue, and open up the arena’s wrap-around concourses with views of the outside. The renovation would not expand the building beyond its footprint or add to its 17,000-seat capacity. Garden officials said the renovation would be completed in time for the 2011-12 Knicks and Rangers seasons, and that none of the scheduled games in the interim two seasons would be affected.

“This is about enhancing our customers’ experience,” the vice chairman of Madison Square Garden and Cablevision Systems Corp., Hank Ratner, said yesterday. “We want to ensure the experience at Madison Square Garden is like nowhere else in the world.” Last week’s surprise announcement that Madison Square Garden would move ahead with a renovation plan rather than move to an alternate site in the back of the Farley Post Office building was met with scorn by local elected officials. Moving the arena is an essential piece of a grand plan involving two private developers, the Related Cos. and Vornado Realty Trust, to remake Penn Station and rebuild the Garden site with office towers. Some elected officials expressed skepticism and said the renovation plan was a negotiating tactic by the Garden’s owners, the Dolan family, who had grown frustrated with the delays in the proposed Moynihan Station project.

When asked yesterday whether there was anything the city and the state could do to lure the Garden back to the bargaining table, Mr. Ratner said: “You saw the plans, you see the model. We can accomplish everything that anybody could possibly want in a new arena by renovating. We are not going to be moving.”

Mr. Ratner also said construction would require building permits, which are issued by the city, but would not be required to go through the city’s land use review process.

The renovation would not begin for another year, providing elected leaders with a window of time to convince Garden officials that moving to an alternate location is a better plan.

“We’re taking a close look at this and will remain in close discussion with all parties with a goal of building the best Moynihan Station possible and developing the West Side,” Senator Schumer said in a statement.

Last week, Mr. Schumer called upon the Port Authority of New York and New Jersey to take over the project, an idea that had been opposed by the Spitzer administration.

Allowing the Port Authority a lead role would add yet another agency to a mix that already includes the Bloomberg administration, the state Legislature, Amtrak, New Jersey Transit, the Long Island Rail Road, and the private developers, Related and Vornado.

A spokesman for the developers declined to comment yesterday.