The move follows British Waterways' decision to earmark Garstang as a special 2008 visitor destination.
Part of the project, which will see improvements on the towpath along its route through the town, is the long-awaited new access and ramp from Kepple Lane to the canal.
For several years the access to the towpath on the southern side of Kepple Lane has been regarded as a road safety hazard for both pedestrians and motorists, as there is no pavement at that section of the road.
But, following correspondence with Garstang Town Council, British Waterways agreed to a new access and ramp on the northern side of the road.
A BW spokesman said the £100k scheme would see 1.5 kilometres of towpath upgraded between bridge 64 and bridge 59.
The project, which is now under way, will be funded by Lancashire County Council, Sustrans and Garstang Market Town Initiative.
The towpath, used daily by pupils of St Thomas's and the High School, as well as walkers, anglers and canal boat moorees, is currently in poor condition, uneven in some locations and suffers from poor drainage. The scheme will widen the towpath to two metres and it will be given a new bitumen surface.
Other works will include fencing, drainage works and access ramps for people with mobility restrictions and for cyclists.
British Waterways North West general manager Debbie Lumb said the improvements would benefit communities and visitors alike.
"The fact that the towpath is part of a safe route to school for local children means it is a high priority scheme" she said.
The move to create the safer access from the canal was first suggested by Mrs Joan Williams before she joined the town council.
Coun Williams, this year's Garstang mayor, welcomed the start of the work in her report to the annual town council meeting last Tuesday.