1630-1758
St. Peter's is one of North America's oldest European settlements, tracing its history to the 1630s when a small fortified settlement named "Saint Pierre" was built by merchants from La Rochelle, France on the isthmus. In 1650, La Rochelle merchant Nicholas Denys took possession of Saint Pierre and encouraged the fur trade with local members of the Mi'kmaq Nation who used the isthmus as a canoe portage route between the Atlantic Ocean and Bras d'Or Lake. In addition to establishing a fur trading post, Denys later used the isthmus as a "haul over road" for portaging small sailing ships from Bras d'Or Lake to the Atlantic and vice versa.

France lost possession of present-day peninsular (main land) Nova Scotia to Britain in the Treaty of Utrecht in 1713. France began moving some Acadian colonists to Ile Royale (present-day Cape Breton Island) to populate this remaining outpost of Acadia. Port Toulouse was created near the 17th century location of the fortified community of Saint Pierre as a logistics base and supply centre for Fortress Louisbourg. To protect Port Toulouse, France built another fortification on the shore. The forts at Port Toulouse and Saint Pierre and settlements in the area were destroyed by the British in 1758 following the fall of Fortress Louisbourg and the rest of Acadia became a British colony.

1758-present
Acadia in its entirety was given the name Nova Scotia, which was used as the name used since 1713 for Britain's portion of the territory. Britain sponsored settlers and displaced veterans from the Seven Years' War to move into the area of Saint Pierre/Port Toulouse. France declared war on Great Britain on February 1, 1793 during the French Revolutionary Wars. In response, Britain built Fort Dorchester on the summit of Mount Granville, a hill overlooking the isthmus.

The village of St. Peters was founded early in the 1800s. Local residents rehabilitated Denys's old "haul over road", laying wood skids for portaging small sailing ships across the isthmus. The route through Bras d'Or Lake was considered a much shorter and safer voyage to Sydney than traveling around the exposed southern coast of Cape Breton Island. In 1825 a feasibility study into building a canal was undertaken. Construction of the St. Peters Canal began in 1854 and took 15 years of digging, blasting and drilling through a solid granite hill 20 m (65 ft high to build a channel 800 m (2,600 ft long with an average width of 30 m (100 ft). The canal opened in 1869 at the dawn of the industrial age on Cape Breton Island. There can be a tidal difference of up to 1.4 m (4.5 ft) thus a lock was designed to regulate water levels.

The walls of the canal were lined with timber planking and locks were installed at each end. Modifications to the canal and lock continued until 1917 and the canal saw moderate to heavy use by small coastal steamships and barges, particularly during the First and Second World Wars when coal from the Sydney Coal Field was transported on this sheltered inland route to avoid U boats. A marble quarry on the western shore of Bras d'Or Lake at Marble Mountain also generated some shipping traffic.

The canal was designated a National Historic Site in 1929 and the federal government took over its operation. Parks Canada is the government agency responsible for its maintenance and operation and undertook a major project to restore both entrances to the canal in 1985. During the postwar, commercial shipping has largely avoided traveling through Bras d'Or Lake and the canal is almost exclusively used by pleasure boats, particularly sail boats with the increased popularity of cruising Bras d'Or Lake in recent decades.

Parks Canada operates the canal from May to October each year. Vessels transiting the canal are limited by the size of the lock, which measures 91.44 m (301 ft) long, 14.45 m (47 ft) wide, and 4.88m (16 ft) draught. The ruins of Nicholas Denys's Fort Saint Pierre are located on the grounds of the lock master's house (ca. 1876) and the ruins of Fort Dorchester are located on Mount Granville which overlooks the Atlantic approach to the canal.