According to reports, the platform would block certain sites and prohibit the search of restricted terms such as those related to religion and human rights.
Mr Pichai told staff development was at an "early stage" and it was "very unclear" if Google would launch the product.
Google has been working on an app to bring its censored search engine back to mainland China, in a move that would allow the U.S. technology company to reach the 772m internet users in China who can not now use its services.
"Dragonfly and Google's return to China raise urgent moral and ethical issues". Sundar Pichai told a company-wide meeting that providing more services in the world's most populous country fits with Google's global mission.
"Here, we address an underlying structural problem: now, we do not have the information required to make ethically-informed decisions about our work, our projects, and our employment", the letter reads.
Google, which has never spoken publicly about the plans, declined to comment. Eight years ago, as Google pulled censored web search out of China, Sergey Brin explained the decision, saying: "in some aspects of [government] policy, particularly with respect to censorship, with respect to surveillance of dissidents, I see some earmarks of totalitarianism".
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China is the world's biggest single internet market, but USA companies are having a hard time there, with Google, Twitter and Facebook all being banned.
'The team has been in an exploration stage for quite a while now, and I think they are exploring many options, ' he added. It has said in the past that it will not comment on Dragonfly or "speculation about future plans".
The China petition says employees are concerned the project, code named Dragonfly, "makes clear" that ethics principles Google issued during the drone debate "are not enough".
"China is one-fifth of the world's population".
In a letter demanding increased transparency about the project, known as Dragonfly, Google employees wrote that they lacked the necessary information to make "ethically-informed decisions about our work, our projects, and our employment", according to the letter, which was first published by The New York Times. "I think if we were to do our mission well, I think we have to think seriously about how we do more in China", Mr Pichai said.