The idea of building transportation canals in America began in the early 1700s after the Dutch, French, and British canals of the mid- to late-1600s proved to be successes after much trial and error. The first artificially created waterway in North America was constructed by the British Royal Engineers between 1779 to 1783 to overcome the rapids above Montreal, Canada. The first canal built in the newly-created United States was completed in 1789 by the James River Company of Virginia - a four mile stretch to circumnavigate the falls above Richmond and to allow passage to the tidewater area downstream.

The first canal in North Carolina was the Dismal Swamp Canal - originally opened in 1784 as little more than a barely-navigable ditch. Officially chartered in 1793, it was enlarged considerably - by 1805 was capable of handling six-foot wide flatboats, and was fully operational in 1812. It had no locks, but it was thirty-two (32) feet wide and twenty-two (22) miles long - from the Elizabeth River in Virginia to the Pasquotank River in Camden County, North Carolina - connecting the Chesapeake Bay with the Albemarle Sound.

The construction of artificial waterways was an expensive effort, requiring significant labor resources and financial capital. The Southern states relied considerably on slave labor, including Africans and indentured servants to keep costs down. Private companies were launched with the expectation of a decent return on their investment via tolls for boat transporation along their planned canals. Many had unrealistic expectations of the difficulties to be encountered - not only in labor management, but also in the natural obstacles they had not anticipated. As a result, many canals were initiated in the 1790s and early 1800s, but very few were ever actually completed.

The first thrusts in North Carolina began in earnest soon after the Revolutionary War and construction began mostly in the 1790s, with some significant completions in the early 1800s. However, the numerous failures led to a disillusionment with regard to canal building and new construction slowed to a near halt - until the successful opening of the Erie Canal in New York in 1825, and a renewed optimism arrived in the state. However, the funding and oversight would have to be provided by the State since no new companies wanted to take on the financial burdens by themselves.

By this time, many folks realized that canals for transportation were very expensive due to the depth and width required to meet the needs of those willing to build flatboats to utilize canals. However, others realized that the construction of drainage canals did not require the precision as those to used for transportation. Eastern North Carolina had many swamps as well as coastal tidewaters that were useless for farming, and if some of these could be drained then perhaps more farmland could be reclaimed. To take this to the extreme, those living around Lake Mattamuskeet (in Hyde County) decided that the entire lake was "useless," and serious attempts were made in the 1830s and 1840s to actually try to completely drain it - for the potential farmland beneath.

With the advent of railroads that began to arrive in North Carolina in the 1840s, transportation canals soon no longer seemed to be fashionable - or affordable. At the end of the U.S. Civil War in 1865 with slavery abolished, North Carolinians had no cheap labor supply for the construction of new canals, and those that were already operational saw a long period of decline in usefulness. Some fell into complete disrepair and are no longer used.

In the early 1900s, there was a resurgence of canal building in North Carolina, and this was primarily due to the successful completion of the Panama Canal, as well as the concept of the U.S. Intracoastal Waterway that had been discussed as early as the 1880s. Most canals built in the 1910s/1920s were for drainage in the eastern counties for mosquito control and the prevention of malaria, and these are still useful today. The construction of the Intracoastal Waterway by the US Army Corps of Engineers in the 1920s/1930s introduced a few more canals within North Carolina for transportation.

The 1960s and 1970s found the barrier islands along the North Carolina coast to be attractive vacation spots and many land developers of these barrier islands "rediscovered" the concept of canals - short waterways dredged out of the barrier islands to increase the quantity of "waterfront" properties, therefore increasing the land values. Hundreds, if not thousands of new small canals were constructed by these developers all along the North Carolina coast.