Taken from Wikipedia http://en.wikipedia.org/wiki/Name_of_Canada#Adoption_of_Dominion
During the Charlottetown Conference of 1864, John A. Macdonald, who later became the first Prime Minister of Canada, talked of "founding a great British monarchy", in connection with the British Empire. He advocated, in the fourth Canadian draft of the British North America Act, the name "Kingdom of Canada," in the text is said:
The word 'Parliament' shall mean the Legislature or Parliament of the Kingdom of Canada.
The word 'Kingdom' shall mean and comprehend the United Provinces of Ontario, Quebec, Nova Scotia, and New Brunswick.
The words 'Privy Council' shall mean such persons as may from time to time be appointed, by the Governor General, and sworn to aid and advise in the Government of the Kingdom.
Canada's founders, led by Sir John A. Macdonald wished their new nation to be called the Kingdom of Canada, to "fix the monarchical basis of the constitution." The governor general at the time, the Viscount Monck, supported the move to designate Canada a kingdom; however, officials at the Colonial Office in London opposed this potentially "premature" and "pretentious" reference for a new country. They were also wary of antagonizing the United States, which had emerged from its Civil War as a formidable military power with unsettled grievances because British interests had sold ships to the Confederacy despite a blockade, and thus opposed the use of terms such as kingdom or empire to describe the new country.
New Brunswick premier Sir Samuel Leonard Tilley suggested the term 'Dominion', inspired by Psalm 72:8 (from the King James Bible): "He shall have dominion also from sea to sea, and from the river unto the ends of the earth." This is also echoed in Canada's motto: A Mari Usque Ad Mare (Latin for "from sea to sea").