Nicaragua Canal, proposed waterway between the Atlantic and the Pacific oceans. One often considered route would be 172.8 mi (278 km) long and would generally follow the San Juan River, then go through Lake Nicaragua near the southern shore and across the narrow isthmus of Rivas to the Pacific Ocean. First proposed by Henry Clay, the U.S. secretary of state in 1826, the route was an important factor in negotiation of the Clayton-Bulwer Treaty (1850). In more recent times the route has been considered as an adjunct to the Panama Canal; it would shorten the water distance between New York and San Francisco by nearly 500 mi (805 km).

Under the Bryan-Chamorro Treaty (1916), the United States paid Nicaragua $3 million for an option in perpetuity and free of taxation, including 99-year leases to the Corn Islands and a site for a naval base on the Gulf of Fonseca. Costa Rica protested that Costa Rican rights to the San Juan River were infringed, and El Salvador maintained that the proposed naval base affected both it and Honduras. Both protests were upheld by the Central American Court of Justice. The court rulings were ignored by Nicaragua and the United States. The action was bitterly criticized by Latin Americans and others as an example of U.S. imperialism. A possible route was surveyed in the early 1930s, and a barge canal was proposed later in the decade. In 1970 the Bryan-Chamorro Treaty was rescinded.

In 2013, Nicaragua granted the Hong Kong Nicaragua Canal Development Investment Co. a 50-year concession for the building of the Nicaragua Canal. The company subsequently proposed (2014) a route that would begin at Punta Gorda on Nicaragua's Caribbean coast (more than 40 mi/65 km N of the San Juan River's mouth), cross Lake Nicaragua, and then enter the Pacific at Brito.

Lake Nicaragua, 3,089 sq mi (8,001 sq km), c.100 mi (160 km) long and up to 45 mi (72 km) wide, SW Nicaragua; the largest lake of Central America. It is drained into the Caribbean Sea by the San Juan River. Lake Nicaragua, along with Lake Managua (which drains into it from the northwest), occupies part of the Nicaragua Depression, an extensive lowland region stretching across the isthmus. Once part of the sea, the lake was formed when the land rose. There are several islands in the lake (the largest is Isla de Ometepe); and small volcanoes rise above its surface. The freshwater of Lake Nicaragua contains fish usually associated with saltwater, including tuna and sharks, which have adapted to the environmental change. The lake is a transportation route; Granada is its chief port. Located only 110 ft (34 m) above sea level, the lake reaches a depth of 84 ft (26 m). It was to be an important link in the proposed Nicaragua Canal.