The building of canals was the most expensive, difficult, and dramatic feature of the transportation revolution upon which the market economy depended. Water highways that followed the lay of the land, crossing rivers and ascending hills, canals called forth stupendous feats of engineering and numbing labor. Parts of the Erie Canal ran through a virtual wilderness. Trees had to be felled, stumps uprooted, earth excavated to several feet of depth, and solid rock, two miles of it toward the western end of the Erie, blasted through. The builders were aided by a superior type of blasting powder manufactured in Delaware by a French immigrant, E. I. du Pont, and by a clever machine devised in 1819 by one of the canal workers that made it possible to pull down a tree, how-ever tall, by running a cable secured to a screw and crank up the tree and then turning the crank till the tree dropped.

Like other canals, the Erie also required aqueducts, arched causeways whose wooden troughs carried canal boats over natural bodies of water in the path of construction, and locks. The Erie's eighty-three locks were watertight compartments that acted as steps to overcome natural rises and falls in the terrain. At Lockport, side-by-side locks carried traffic up a rise of seventy-three feet. The locks themselves were anywhere from ninety to one hundred feet high by fifteen to eighteen feet wide. Their sides were built of cut stone, with foot-thick timbers as floors and two layers of planks on top of the timber. Huge wooden lock gates were fitted with smaller gates (wickets) for releasing water from a lock while the main gates remained closed.

Although a few short canals had been constructed in the 1790s, nothing on the scale of the Erie had ever been attempted. France and Britain had several canals with locks and aqueducts, but European experience had not been written down and, in any event, the techniques for building canals in Europe were of limited application to New York. The short canals of Europe relied more on stone than was feasible in New York, where wood was abundant and quarries distant from the canal site. Building a canal 363 miles long required thousands of workers, hundreds of supervisors, and several engineers. When construction of the Erie commenced in 1817, New York had none of these: no public work force, no employees who had ever supervised the building of even a short canal, and virtually no trained engineers. (Aside from the trickle of graduates of the military academy at West Point, the United States had no engineering students and no schools devoted to training them.) By occupation, the prominent engineers on the Erie were judges, merchants, and surveyors; none had formal training in engineering.

Building the canal required endless adaptations to circumstances. Since the state had no public work force, laborers were engaged and paid by private contractors, usually local artisans or farmers, each of whom contracted with the state to build up to a mile of the canal. Engineering problems were solved by trial and error. For example, one of the most difficult tasks in building the Erie was to find a way to seal its banks so that the earth would not absorb the four feet of water that marked the canal's depth and thus leave canal barges stranded on mud. In the 1790s an English immigrant had introduced Americans to a process called "puddling," forming a cement sealant out of soil or rock, but the Erie builders needed to find a form of soil or stone that would make a good sealant and also be abundant in New York. The very length of the canal ruled out transporting substances over long distances. After repeated experiments with different kinds of limestone, in 1818 canal engineer Canvass White discovered a type in Madison County, New York, that, when heated to a high temperature, reduced to a powder and, mixed with water and sand, became a cement with the great virtue of hardening under water. The Erie served as a great school of engineering, educating a generation of Americans in the principles and practices of canal building. After its completion, its "graduates" moved to other states to oversee the construction of new canals.

When the Erie Canal opened in 1825, it was not without defects. Its banks sometimes collapsed. Lines of barges piled up in front of each lock, creating colossal traffic jams. In December, the freezing of the Erie made it unusable until April. But the opening of the canal dazzled the imaginations of Americans. Not only had technology removed an obstacle placed by nature in the path of progress; it also conveyed small luxuries to unlikely places. Now farmers in the West marveled at the availability of oysters from Long Island.