In 1825, the Ohio Legislature approved funding to construct an Ohio Canal system. It took 20 years, from 1825 to 1845, to complete the Miami-Erie Canal. The primary work force consisted of Irish, German and French immigrants who labored on the canal for 30 cents a day, food, whiskey and shelter. To finance the canals, the Ohio government relied on loans. The legislature established a Canal Fund Commission to regulate the costs of and the securing of money for the canals. Ohio received its initial loan for construction of the canals from bankers and businessmen living along the East Coast. The initial loan was for 400,000 dollars. The canal commissioners estimated that the while the Miami and Erie would cost 2.9 million. Once construction was completed, the canals combined actually roughly twelve thousand dollars per mile to finish. The canals nearly bankrupted the state government, but they allowed Ohioans to prosper beginning in the 1830s all the way to the Civil War.

Once completed, the canals still faced numerous difficulties. Flooding could do serious damage to the locks, walls, and towpaths, requiring extensive repairs. Especially in northern Ohio, cold weather would cause the canals to freeze, also causing damage. Usually canals in the northern half of the state were drained dry from November to April. During the winter months, workers would repair any damage that occurred during the earlier part of the year. In southern Ohio, canals generally stayed open the entire year.

The Miami and Erie never proved to be as profitable as the state government had hoped, as within several years of being completed to Lake Erie it had to compete with railroads. These offered greater speed and capacity for both passengers and goods. Factors limiting the canal's success included the lower population and level of economic development in Ohio. The canal was completed just before most of the railroads in Ohio were built, and it had to compete directly with railroads for the remainder of its operation. Due to the canal freezing over in the winter, as well as the slowness of the boats, the canal was less practical than railroads, especially for perishable goods and passenger traffic. 

The canal had largely ceased to operate by 1906, while portions still ran, the catastrophic Great Dayton Flood of 1913 and the subsequent flood control measures constructed by the Miami Conservancy District destroyed much of the canal infrastructure along the southern portion of the route, where it paralleled the Great Miami River. The canal was permanently abandoned. What was not destroyed was no longer maintained, and slowly many of the remaining locks and sections of canal were destroyed, with the open canal filled in.