Standing inside Disneyland, you almost forget that Anaheim, California, exists. The park's attractions block views of the city, and piped-in music drowns out traffic noise. The place is scrubbed so clean that trash stays on the ground only seconds before being swept up.

But go outside its boundaries, and Fantasyland fades fast. Rental units and apartments overflow with resort employees. A mobile-home park sits across from a plot of land where Disney may one day add another theme park. The jewel of Disney's theme-park crown is surrounded by a vast sprawl that is home to one of the fastest-growing Latino populations in the U.S. Anaheim has transformed itself from an aerospace-industry suburb into an increasingly vertical city.

"With Disney there, Anaheim is like Peking, with the old imperial city inside it," says Jaque Robertson, a New York architect who oversaw the design and construction of the resort district.

Adds former Anaheim mayor Tom Daly, "It's now a theme park surrounded by a metropolis."

For decades, outsiders who knew of Anaheim knew it because of Disneyland, and both were symbols of the suburban, crew-cut 1950s. But while Disneyland has remained a place apart, Anaheim has changed. The result is a new divide between the theme park and the hometown it once dominated (see slideshow). This year, Disney sued the city for the first time in the park's 50-year history, and both the company and council are headed toward an expensive municipal-ballot fight.

On the surface, the split is about zoning and whether new condos and low-income housing should be permitted in a district that had been dedicated to tourism. But the rhetoric has quickly moved into some very uncomfortable territory for Disney. The company—which famously brought wine into its Paris park to cater to French tastes and shark-fin soup to Hong Kong Disneyland—is being accused of falling out of touch with the people who live in its own backyard.

When Walt Disney approached Anaheim city leaders with plans for his theme park in 1954, they bent rules to accommodate him. The city quietly annexed county land for the park, blocked the building of a tall hotel that might affect the sight lines of park visitors, and altered street maps to give Walt the address he wanted: 1313 South Harbor Boulevard. (Since M is the 13th letter of the alphabet, 1313 is a shout-out to M.M., or Mickey Mouse.) Disneyland reciprocated by employing former city officials and paying for an annual fishing trip to San Diego for civic leaders.

For Disneyland's first four decades, Disney executives with deep local connections tended to Anaheim's happiness. Bill Ross, a senior vice president, went to college in nearby Fullerton and started out as a ride operator at Disneyland; Ron Dominguez, a former senior corporate officer, grew up on the farm that is now Fantasyland.

In the early 1990s, Disney's world began to expand. A 2.2-square-mile zone around Disneyland was designated as a resort district, and a $500 million bond was floated to improve local infrastructure. Disney agreed to pay the difference if tourism-generated taxes didn't cover the bond. Existing businesses and housing, including several mobile-home parks, were grandfathered in, but new development in the area was restricted to tourism-related uses—hotels, restaurants, and attractions—so if the time came when Disney needed to grow, it would have enough space to do so.