The new canal is expected to help create £167m in revenue over 10 years
Work has started on a 16-mile (26km) extension to link the Grand Union canal with the River Ouse and open up the waterways of East Anglia.
Bedford and Milton Keynes Waterway is hailed as one of the great engineering projects of the 21st Century.
An underpass to carry the waterway beneath the A421 road is being built and land has been bought along the route from Stewartby to Kempston.
The new canal is regarded the "missing link" in the inland waterway system.
Jane Wolfson, chairwoman of the Bedford and Milton Keynes Waterway Trust, said: "These works are the first tangible signs the waterway has progressed from an idea that might happen to an idea that can happen.
"It has the potential to become one of the great projects of this century and to become an iconic feature of the central Bedfordshire landscape."
The waterway will run from the junction with the Grand Union Canal at Milton Keynes to the junction with the Great Ouse at Kempston.
A recent economic impact assessment of the project indicates that over a 10-year period visitors to the waterway and linked facilities could bring £167m to the local economy.
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