The town is located along an old canal, also called Dedemsvaart, which is the source of the village's name. The canal lost its commercial importance after World War II. The area around Dedemsvaart, until 2001 part of the municipality of Avereest, was an important center for industry. Baron Willem Jan of Dedem, after whom canal and town were named, made a plan to dig a canal; construction began on 9 July 1810. Around two years later, in 1811, the canal had already reached Balkbrug. In 1845 the project got into financial trouble and the baron had to forfeit the canal of Dedemsvaart, until then a private possession, to the province of Overijssel, who took further care of the canal. Over the years the canal changed and eventually became unfit for commercial use.