The canal was primarily built as a sewage treatment scheme. Prior to its opening in 1900, sewage from the city of Chicago was dumped into the Chicago River and flowed into Lake Michigan. The city's drinking water supply was located offshore, and there were fears that the sewage could reach the intake and cause serious disease outbreaks. Since the sewer systems were already flowing into the river, the decision was made to dam the river and reverse its flow, thereby sending all the sewage inland where it could be treated before emptying it into the Des Plaines.

A secondary goal was to replace the shallow and narrow Illinois and Michigan Canal (I&M), which had originally connected Lake Michigan with the Mississippi starting in 1848. As part of the construction of the new canal, the entire route was built to allow much larger ships to navigate it. It is 202 feet (62 m) wide and 24 feet (7.3 m) deep, over three times the size of the I&M. The I&M became a secondary route with the new canal's opening and was shut down entirely with the creation of the Illinois Waterway network in 1933.