In its heyday, up to 460,000 tons of freight per year was conveyed by the navigation between Preston and Lancaster. The cargo included coal from Preston and limestone from around Burton-in-Kendal and Holme, and hence, the waterway became known as the 'Black and White Canal'.

The development of the railways heralded the decline of many waterways and the Lancaster Canal was no exception. In the 1880s the waterway passed from the Lancaster Canal Company to the London and North Western Railway Company. In the 1920s, it became the property of the London Midland Scottish Railway, which in response to the progressive decline in trade, attempted to close the waterway in the 1940s. The final cargo was conveyed from Preston to Lancaster in 1947.

In 1948, the Lancaster Canal, along with most of the inland waterway network, was nationalised and passed to the British Transport Commission. The Commission determined, in 1955, that the canal had 'insufficient commercial prospects to justify its retention'. Shortly thereafter, the northernmost section of the navigation between Stainton and Kendal was closed and 3.5km of the waterway approaching Kendal were drained and in-filled.

During the 1960s, a further section of the canal in the centre of Preston was closed and in-filled, and the length north of Tewitfield was closed following the construction of the M6 motorway. Ownership of the canal passed to British Waterways Board in 1963.

Today the Lancaster Canal between Preston and Tewitfield Locks, including the Glasson Branch, remains navigable and is promoted as a 'cruising waterway' under the 1968 Transport Act. Under the same Act, the length of waterway known as the Northern Reaches, between Tewitfield and Stainton, is classified as a 'remainder waterway' and is closed to through navigation. Both sections continue to be owned and operated by British Waterways. The tenure and extent of the waterway between Stainton and Kendal is very fragmented.