Construction of the Lehigh Canal began in Bethlehem in August 1827. The canal was fully watered by June 1829; the first two boats carrying anthracite passed through the community on June 10. Not long after that a packet boat carrying tourists – the “Swan” – began regular runs on the canal.

The Lehigh Canal had different effects on Bethlehem. The community’s Moravian settlers objected to the canal because of the outside influences it would bring to their quiet, “closed” community. Some of the town’s older buildings, such as the laundry of the Young Ladies’ Seminary, had to be removed to make way for the 60-foot-wide, five-foot-deep “ditch.” Farming ceased on Sand Island between Monocacy Creek and the Lehigh River because of canal activity. A grist mill on the Monocacy between the canal and the Lehigh was rendered useless. Even the course of Monocacy Creek was altered to facilitate an aqueduct that carried the canal across the creek adjacent to Lock 42. Citizens complained about the stately trees that were being cut along the new waterway.

All sorts of buildings  – hotels, businesses, warehouses, and houses – were erected along the canal once it opened. In 1830 the new cluster of buildings was given the name South Bethlehem. Lumber and coal yards were opened that lasted for more than 100 years. Brown and Borhek, and Fritch Fuel are some of the names still familiar to Bethlehem residents.

The most conspicuous building along the new canal was Bethlehem’s third hotel, the Anchor Hotel, first kept by Captain Henry Woehler, an old German soldier who fought at the battle of Waterloo in the Napoleonic Wars. Maximilian Prince of Wied, in Germany, stayed at the hotel during his travels in North America. His 1843 memoirs – Travels in North America – commented on many of the attractive features of Bethlehem as well as its material prospects owing to the canal. He was accompanied by John Bodmar, a well-known American artist of the mid-19th century.

The canal era in Bethlehem quietly ended in the 1930s. Today’s Lehigh Canal in Bethlehem is a silent reminder of a golden age of prosperity that turned a small, closed Moravian community into one of the epicenters of the American Industrial Revolution.