diff --git a/src/clear_cmd.cpp b/src/clear_cmd.cpp
index c69ff0d99d..7b95d085a3 100644
--- a/src/clear_cmd.cpp
+++ b/src/clear_cmd.cpp
@@ -22,6 +22,7 @@
 #include "unmovable_map.h"
 #include "genworld.h"
 #include "industry.h"
+#include "water_map.h"
 
 struct TerraformerHeightMod {
 	TileIndex tile;
@@ -141,6 +142,13 @@ static int TerraformProc(TerraformerState *ts, TileIndex tile, int mode)
 		}
 	}
 
+	/* Canals can't be terraformed */
+	if (IsClearWaterTile(tile) && IsCanal(tile)) {
+		_terraform_err_tile = tile;
+		_error_message = STR_MUST_DEMOLISH_CANAL_FIRST;
+		return -1;
+	}
+
 	ret = DoCommand(tile, 0, 0, ts->flags & ~DC_EXEC, CMD_LANDSCAPE_CLEAR);
 
 	if (CmdFailed(ret)) {
diff --git a/src/lang/english.txt b/src/lang/english.txt
index ba0de6a49e..ea492f0a41 100644
--- a/src/lang/english.txt
+++ b/src/lang/english.txt
@@ -1891,6 +1891,7 @@ STR_3804_WATER                                                  :Water
 STR_3805_COAST_OR_RIVERBANK                                     :Coast or riverbank
 STR_3806_SHIP_DEPOT                                             :Ship depot
 STR_3807_CAN_T_BUILD_ON_WATER                                   :{WHITE}...Can't build on water
+STR_MUST_DEMOLISH_CANAL_FIRST                                   :{WHITE}Must demolish canal first
 
 ##id 0x4000
 STR_4000_SAVE_GAME                                              :{WHITE}Save Game
diff --git a/src/water_map.h b/src/water_map.h
index cb20bd15a0..77fce0a17d 100644
--- a/src/water_map.h
+++ b/src/water_map.h
@@ -45,6 +45,11 @@ static inline bool IsCoast(TileIndex t)
 	return GetWaterTileType(t) == WATER_TILE_COAST;
 }
 
+static inline bool IsCanal(TileIndex t)
+{
+	return GetWaterTileType(t) == WATER_TILE_CLEAR && GetTileOwner(t) != OWNER_WATER;
+}
+
 static inline bool IsClearWaterTile(TileIndex t)
 {
 	return IsTileType(t, MP_WATER) && IsWater(t) && GetTileSlope(t, NULL) == SLOPE_FLAT;