The changes in the phytoplankton size, species composition and physico-chemical characters of El-Salam Canal water (in the west of Suez Canal) compared with that of Nile water at Damietta region were studied during May 1999. Great variations in physico-chemical characters between EI-Salam Canal water and Nile water were observed due to the disposal of Bahr Hadus drain water and/or seepage of El-Manzala lake water which may reach to El-Salam Canal water. pH; E.C; phosphate-P ; nitrate-N; chloride ; sulphate ; carabonate ; Magnesium ; Calcium ; Sodium and Potassium were represented with high values at all sites of El- Salam Canal which surpass those of Nile water . The species composition of the main algal groups showed distinct variations. The dominance of algal groups at EI-Salam Canal was in the following descending divisions: Cyanophyta/ or Chlorophyta > Bacillariophyta > Euglenophyta, on the other hand the dominance of algal groups at Nile water was in the following divisions: Bacillariophyta > Cyanopkta > Chlorophyta > Euglenophyta. The values of pollution index at all sites of El-Salam Canal exceeded those of Nile water. Species diversity index was calculated.