I want to create square grid of polygons along a polyline(Road). Assigning spatial extent of the polyline will create grid squares not containing the line as well.
Do I have any other options ?
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To do this I think you should try the Grid Index Features tool which:
Creates a grid of rectangular polygon features that can be used as an index to specify pages for a map book using Data Driven Pages. A grid can be created that only includes polygon features that intersect another feature layer.
Input Features can be points, lines, polygons, or rasters.