The canal traces its history back to the extension of Copenhagen's West Rampart following the Assault on Copenhagen in 1659 which had taken place there. To better protect Slotsholmen, at that time home both to the royal palace and the fleet, the West Rampart was extended well into the sea. The shallow-watered area between the extended rampart and Slotsholmen was filled to form a district which was given the name Frederiksholm. Frederiksholms Kanal was dug out in 1681.