In the 1880s, there was a growing interest in duplicating the success of the Suez Canal in Central America. As the French under Ferdinand de Lesseps’ leadership championed the Panama Canal, the United States had its eyes set on constructing a canal through Nicaragua that beckoned as the answer to the U.S. maritime and naval ambitions. Espousing ideals of liberal nation-making, Nicaragua sought to annex the Reserve to the Republic in 1894 and fulfill its vision of unbroken sovereignty from the Atlantic to the Pacific. Yet the crisis was also an internal one within the Mosquito Kingdom, pitting reserve “Indians” against non-Reserve Miskitus and reviving again the question of racial legitimacy of the Mosquito Reserve government. This chapter delves into this thorny crisis – also known as the “incorporation” of the Mosquito Reserve – to illuminate the violence that lay behind the dream of the interoceanic Nicaragua Canal and to show the centrality of the canal to geopolitical identity – both of the Republic of Nicaragua and post-Civil War United States. In the end, this chapter argues, the pursuit of the Nicaragua Canal was predicated on the elimination of the Mosquito autonomous territory.