It connected the market town of Strabane to the navigable River Foyle and from there to Londonderry Port on the north coast of Ireland.

[1] Construction began in late 1791, with John Whally of Coleraine acting as engineer, after the plans had been inspected by Richard Owen, then working on the extension of the Lagan Canal from Lisburn to Lough Neagh.

The "respectable inhabitants" ate at The Abercorn Arms, and proposed many toasts, while ale was supplied to the general populace, and there were bonfires and illuminations.

An upstream trade in coal, timber, hardware and foodstuffs developed, although there was dissatisfaction with the tolls, which were considered by the merchants to be too high and unreasonable.

The canal brought considerable prosperity to Strabane and to Lifford in the first quarter of the nineteenth century and the towns became flourishing markets for agricultural produce.

Although traffic remained at about 20,000 tons until the end of the century, this generated between £2,000 and £3,000 of income, and by the time operating costs and the lease were paid, the net annual revenue was always below £300.

[5] The Railway and Canal Traffic Act 1888 had made it compulsory for every public company to notify the Board of Trade of their rates and charges.

The water was less than 2 feet (0.61 m) deep along much of the canal, as over 2 miles (3.2 km) of the east bank required repairs to make it watertight, and the lock gates leaked.

James McFarland, who had been the principal shareholder in the canal company since 1890, died around this time, and the lack of good management led to further decline.

The project was launched by President of Ireland, Mary McAleese, in Lifford and intended to restore the 2.4 km (1.5 mi) of canal and two locks to working order.