Maybe this is a bit in the vein of reviving a dead thread - but hey, why not.
There's been a good discussion on where the arch comes from (St. Andrew's United Church, demolished in 1981) but little has been said as to why this location.
The genesis of this archway is a design competition. In the late 1970's, the closure of McGill St and Granby St to Yonge Street posed an interesting question of what to do with this new found open space; the option to create "urban parkettes" was selected. A design competition for the parkettes (you can look up the drawings at digital archives of the City of Toronto) included purpose designed archways, but after implementation, there were cost overruns and the purpose designed archways were scrapped. When St. Andrew's United Church was demolished soon after, the City sourced the archway to supplement the original design and that is the story of why we have one arch and not two.
A plaque was installed in 2011, which says:
This stone arch is from the former St. Andrew's United Church (built in 1923) on Bloor Street East at Park Road. The City of Toronto purchased the arch when the church was demolished in 1981. The arch was then rebuilt here as a pedestrian gateway, after the intersection of McGill and Yonge Streets was closed.