It had responsibility for the construction, operation, and maintenance of federal government-owned railways, as well as the operational responsibility for canals in Canada.
The department was created in 1879 by transferring several existing government operations, namely the Railway Branch of the Department of Public Works and the operational responsibilities for canals, which were administered by the government's Office of the Chief Engineer.
The Railway Branch was responsible for administering the federally owned railways, namely the Intercolonial Railway of Canada and the Prince Edward Island Railway (at the time of the department's creation).
The branch also provided a program of financial assistance to encourage new railway construction in the country.
The Canal Branch administered Canada's canal system and undertook new construction as required.