Hamakua Canal was originally the waterway of Kawai Nui Stream that drained the Kawai Nui Marsh. Running alon g the base of Pu'u o Ehu it joined with the waters of Ka'elepulu Pond (Enchanted Lake) and emptied into Kailua Bay through Ka'elepulu Stream.

The area of Coconut Grove was subject to flooding during heavy rains and a canal was dug between the marsh and the residential area. Kawai Nui Stream was renamed Hamakua Canal and the waterway was completely closed off to Kawai Nui Marsh. The canal today carries water from the storm drains and surface runoff from most of the Kailua neighborhoods between Kawai Nui Marsh and Kailua Bay as well as Kailua Town.
 

Hamakua Marsh borders a portion of the canala and was recently designated a Ramsar site because of the significance of the wetlands as a habitiat for endangered Hawaiian waterbirds. The Hamakua Marsh Ecosystem Restoration Project restored 20 acres of wetland for native and migratory waterbirds which included the removal of mangroves in the area. The waters from the canal and surface runoff provide a wetland habitiat for the native waterbirds.