The city known as the "City of Canals" is Venice in Italy. This iconic city is famous for its picturesque waterways, grand canals, and historic architecture. Venice features a network of canals, including the renowned Grand Canal, which serves as the main thoroughfare. Visitors can explore the city using traditional boats called gondolas. The unique setting of Venice, built on a lagoon, attracts millions of tourists each year and has garnered UNESCO World Heritage status for its cultural significance.