Roads were poor, very slow or nonexistent. The easiest and cheapest travel was by waterway. The Erie Canal (currently part of the New York State Canal System) is a canal in New York State, that runs from the Hudson River to Lake Erie, connecting the Great Lakes with the Atlantic Ocean. It was 363 miles (584 km) long, 40 feet (12 m) wide, and 4 feet (1.2 m) deep. There were 83 locks along the canal, each 90 feet by 15 feet (27 m by 4.5 m). Maximum canal-boat displacement was 75 tons (68 tonnes). The Erie Canal was the first transportation route faster than carts pulled by draft animals between the Eastern Seaboard of the United States and the western interior, and cut transport costs into what was then wilderness by about 95%. The Canal resulted in a massive population surge in western New York, and opened regions further west to increased settlement.

Ships could navigate up the Hudson River to Albany, NY. The Mohawk River opened the central part of the state. Although the canal was first proposed in 1699, it was not until 1798 that the Niagara Canal Company was incorporated and commenced preparations for building. Governor DeWitt Clinton became the chief sponsor, and in 1817 the first portion of a canal was begun, to connect the Hudson River with Lake Erie (and hence to the rest of the Great Lakes). The easy part was built first, a series of bypasses of rapids on the Mohawk River this section of canal was completed in 1819.

Though there was opposition, and the canal was derisively called "Clinton's Ditch" or worse, "Clinton's Folly," the canal was finally completed in October 26, 1825. Officially the event was celebrated by cannon shots along the length, and by Governor Clinton ceremonially pouring Lake Erie water into the New York Harbor in the "Wedding of the Waters."

The Erie Canal proved to be a stroke of genius, as settlers now poured from New England, Eastern New York and Europe into the central and western part of the state. At the beginning of the nineteenth century, the Allegheny Mountains was the Western Frontier. The Northwest Territories that would later become Illinois, Indiana, Michigan and Ohio were rich in timber, minerals, and fertile land for farming. The Erie Canal was the first serious route for settlement west of the Appalachian Mountains, which had previously been a geographic barrier. Now upstate farms and industries could easily ship their products to the large and growing market of New York City and beyond. Had the Welland Canal, which bypassed Niagara Falls to connect Lakes Ontario and Erie, been built first, instead of in 1833, the history of North America could have been far different, with Montreal, Quebec becoming the main eastern port, instead of New York City.

The Erie Canal, is not very important as a trade route today (supplanted by railroads and highways). The Erie Canal did define the development of trade and commerce in New York State that is used today. The port city of Buffalo, Lockport, where the canal crossed a great limestone ridge, mill-town and beautiful 'Flower City' Rochester on the Genessee, and many smaller cities owe their growth, perhaps even their existence, to the Erie Canal. Connecting canals were also built to Lake Ontario and the larger Finger Lakes.