* Mayor says city approved team's watch-party permit request

* Fan event outside Madison Square Garden a tradition

* Knicks owner says only a fraction of fans could have attended

By Amy Tennery

NEW YORK, June 10 (Reuters) - The New York Knicks' owner blasted the mayor and the city on Wednesday for security measures restricting access around Madison Square Garden and canceled a fan party outside the arena for Game 4 of the NBA Finals, arguing too few people would get through the barriers.

Knicks owner James Dolan on Tuesday said Mayor Zohran Mamdani and NYPD Commissioner Jessica Tisch were New York's "biggest party poopers." On Wednesday ahead of Game 4, Dolan's MSG Sports, the holding company for the Knicks, accused Mamdani of turning "the streets around MSG into a police state."

For their part, the mayor and the city said they granted Madison Square Garden's request for a permit to host a 500-to-999-person watch party on Wednesday. The NYPD planned for participants to enter through a security zone that included street closures for the ticketed event.

But Dolan said the city's approval was "disingenuous at best" and abruptly canceled Wednesday's watch party, a tradition at Madison Square Garden for playoff games.

The Knicks, competing in their first NBA Finals home games in 27 years, hoped on Wednesday to extend their 2-1 lead in the best-of-seven series against the San Antonio Spurs.

The 1,000-person attendance cap left "tens of thousands of people who want to come to The Garden to celebrate the Knicks out in the cold," Dolan said. He said he canceled the event because it would have been unfair to those who could not attend.

Mamdani said the decision was "breaking hearts across our city."

The spat was not the first security headache of the week.

U.S. President Donald Trump attended Monday's Game 3, prompting added layers of Secret Service security while the NYPD closed off several blocks around the arena to unauthorized pedestrian traffic. The NBA Finals games in midtown Manhattan have captivated the city, with fans emptying out their pockets for one of the priciest events in recent memory at the self-styled "World's Most Famous Arena."

Trump sat in a luxury box with Dolan on Monday and was booed as he appeared on the Jumbotron during the national anthem, dismissed concerns over the eye-popping ticket prices last week.

Anticipation reached a fever pitch again on Wednesday, as the New York Post reported that pop starlet Taylor Swift would be among the many A-listers in attendance.

The Knicks and the Spurs are set to play Game 5 on Saturday in San Antonio. They will return to New York for Game 6, if necessary.