From 1768 several small canals were built in the area of what is now Telford. These canals carried tub boats. By 1792 this had been expanded to a network extending to Coalbrookdale and Coalport. In 1793 an Act of Parliament was authorised to create a canal to link the town of Shrewsbury with the east Shropshire canal network serving coal mines and ironworks around Oakengates, Ketley, Donnington Wood and Trench, nowadays part of the new town of Telford. The act authorised the raising of £50,000 of shares, and an additional £20,000 if necessary.This canal became the Shrewsbury Canal. This involved the purchase of one mile and 188 yards of the Ketley Canal, which became part of the Shrewsbury Canal.
Josiah Clowes was appointed Chief Engineer, but died in 1795 part way through construction. He was succeeded by Thomas Telford, then just establishing himself as Shropshire's County Surveyor and already engaged on the Ellesmere Canal slightly further north. The Ellesmere Canal was originally intended to connect Chester with Shrewsbury, but never reached the latter - it became the modern Llangollen Canal and Montgomery Canal.
One of Telford's first tasks was to rebuild a stone aqueduct over the River Tern at Longdon-on-Tern which had been swept away by floods in February 1795. Telford's stone-mason instincts initially led him to consider replacing the original structure with another stone-built aqueduct, but the heavy involvement of iron-masters in the Shrewsbury Canal Company, notably William Reynolds, led him to reconsider. Instead, it was rebuilt using a 62-yard cast iron trough cast in sections at Reynolds' Ketley ironworks and bolted together in 1796. The aqueduct was the world's first large-scale iron navigable aqueduct, though it was narrowly predated by a much smaller 44ft-long structure on the Derby Canal built by Benjamin Outram. The aqueduct still stands today, though it is isolated in the middle of a field. This successful use of an iron trough to contain the water of a navigable aqueduct casts the Tern aqueduct in the role of Telford's prototype for the much longer Pontcysyllte Aqueduct on the Llangollen Canal, where he mounted the iron trough on high masonry arches.
The Shrewsbury Canal was finally finished in 1797, being 17 miles (27 km) long, with 11 locks. At Trench an inclined plane was built, which was 223 yards long and raised boats 75 feet up to the Wombridge Canal. From the Wombridge Canal, boats could travel via the Shropshire Canal southwards to the River Severn at Coalport.
The canal was originally built as a narrow canal intended for horse-drawn trains of 20ft-long tub boats no wider than 6 ft 4 inches. However, in preparation for the Newport branch of the Birmingham and Liverpool Junction Canal to Wappenshall the section from there to Shrewsbury was surveyed in 1831 and subsequently widened to take standard narrow boats. This heralded the canal's most profitable period, though it was short-lived.
The Shrewsbury Canal operated isolated from the rest of the national network until 1835, when the Newport Branch was built. This was built as part of the Birmingham & Liverpool Junction Canal, and linked Norbury Junction with the Shrewsbury Canal at Wappenshall Junction.
In 1844 the Humber Arm was constructed. This short branch ran to Lubstree Wharf, which was owned by the Duke of Sutherland. Tramways ran from the end of the branch to various works owned by the Lilleshall Company, who shipped cargoes of pig iron, coal and limestone for use as a flux in the production of iron. The wharf was leased to the Shropshire Union Railways & Canal Co. in 1870, by the third Duke of Sutherland, and closed in 1922 by the fifth Duke.
In 1846, the Shropshire Union Railways and Canal Company bought most of the east Shropshire canal network, including the Shrewsbury Canal. The London and North Western Railway Company (LNWR) took control shortly afterwards and allowed the canal to decline. In 1922, the London, Midland and Scottish Railway took over the canal and the basin in Shrewsbury was closed. The LMS finally abandoned the canal network in 1944.
Of all the canals that formed part of the Shropshire Union Canal system, the Shrewsbury Canal is the only one which has no part open or under restoration. The Shrewsbury & Newport Canals Trust was created in 2000 to preserve and restore the waterway.
In early 2008, the canalside buildings at Wappensall, including a trans-shipment warehouse which has been little altered since it ceased to be used in the 1930s, and retains many original features, was put up for sale. It was eventually purchased, along with a length of the canal and the Wappensall basin, by Telford and Wrekin Council, who are working with the Trust to allow repairs to the buildings to be undertaken, with the aim of providing a museum and heritage centre for the canal and offices for the Canals Trust.
Today the short stretch of canal to the first lock is used as moorings, while the lock itself is used as a dry-dock.
The canal wended its way first to Wappenshall before meandering north-west over the River Tern at Longdon-on-Tern, through Withington, and Uffington towards Shrewsbury where it terminated at Castle Foregate Basin adjacent to the Buttermarket building. This canal incorporated the 970 yard Berwick Tunnel. At the time this was the longest canal tunnel in Britain, and the first equipped with a towpath through it.