The survey was begun in 1871, shortly after Manitoba and the North-West Territories became part of Canada, following the purchase of Rupert's Land from the Hudson’s Bay Company. Covering about 800,000 square kilometres (310,000 sq mi), the survey system and its terminology are deeply ingrained in the rural culture of the Prairies. The DLS is the world's largest survey grid laid down in a single integrated system. The first formal survey done in western Canada was by Peter Fidler in 1813.
The inspiration for the Dominion Land Survey System was the plan for Manitoba (and later Saskatchewan and Alberta) to be agricultural economies. With a large amount of European settlers arriving, Manitoba was undergoing a large change so grasslands and parklands were surveyed, settled, and farmed. The Dominion Land Survey system was developed because the farm name and field position descriptions used in northern Europe were not organized or flexible enough, and the township and concession system used in eastern Canada was not satisfactory. The first meridian was chosen at 97°27′28.4″ west longitude and was established in 1869. Another 6 meridians were established after.
A number of places are excluded from the survey system: these include federal lands such as Indian reserves, federal parks, and air weapon ranges. The surveys do not encroach on reserves because that land was established before the surveys began. When the Hudson's Bay Company relinquished their title to the Dominion on July 15, 1870, via the deed of surrender it received Section 8 and all of Section 26 excluding the northeast quarter. These lands were gradually sold by the company and in 1984 they donated the remaining 5,100 acres (21 km2) to the Saskatchewan Wildlife Association.
The surveying of western Canada was divided into five basic surveys. Each survey's layout was slightly different from the others. The first survey began in 1871 and ended in 1879 and covers some of southern Manitoba and a little of Saskatchewan. The second and smallest survey, in 1880, was used in only small areas of Saskatchewan. This system differs from the first survey because rather than running section lines parallel to the eastern boundary they run true north-south. The largest and most important of these surveys was the third which covers more land than all the others surveys put together. This survey began in 1881. That method of surveying is still used in Saskatchewan and Manitoba. The fourth and fifth surveys were used only in some townships in British Columbia.
The reason that the Canadian government was pushing to subdivide Manitoba, Saskatchewan, and Alberta was to affirm Canadian sovereignty over these lands. The United States was undergoing rapid expansion in the 1860s, and the Canadian government was afraid that the Americans would expand into Canadian territory. Canada's introduction of a railway and surveying was a means to discourage American encroachment. Sir John A. Macdonald remarked in 1870 that the Americans "are resolved to do all they can short of war, to get possession of our western territory, and we must take immediate and vigorous steps to counteract them."