The preliminary study, commissioned by Bradford Council, British Waterways and Bradford Centre Regeneration, says extending the canal into the city would stimulate waterside development and boost the value of land it passes through.
The canal closed in 1922 and has long been cited as a possible way of boosting regeneration.
The study, by civil engineers Arup, says the presence of a canal has the ability to create a vibrant "green corridor" to access existing and future retail, leisure, tourism and workplace destinations.
The 5.2km canal could involve the creation of 10 new locks, four bridges and a number of water-related leisure facilities, at an estimated cost of £17m.
Marc Cole, director of operations at Bradford Centre Regeneration, the company in charge of delivering the masterplan to breathe new life the city, said the re-opening of the canal was a key element in the scheme.
"A new Bradford canal could be a terrific vehicle for change, opening up new development opportunities and contributing to other key infrastructure initiatives, such as flood relief and decontamination of Bradford Beck."
David Crane, engineering manager of British Waterways' Yorkshire Business Unit, added: "This is an exciting project not just for Bradford but for West Yorkshire.
"It could make Bradford a major destination. However, there are still a significant number of hurdles to be crossed before this becomes a reality."
Bradford Council's executive member for the economy, Coun Simon Cooke, said: "Bradford is one of only a few British cities which doesn't have a waterfront. This initiative could be a first step in creating not only an attractive waterfront, but it would also contribute to connecting the city centre with the rest of the area.
"I am pleased that it has been demonstrated that the canal can be delivered and we now have to look at the practicalities, including finance."
Mr Cole explained that, following the completion of the initial study, the partners were now considering commissioning a full feasibility study into the project.
The Bradford Canal opened in 1774 and ran three-and-a-half miles through 10 locks from the Leeds and Liverpool Canal at Shipley on the northern edge of Bradford, along Canal Road to the canal basin in Forster Square.
In 1870 it was sold to the Leeds and Liverpool Canal and the Aire and Calder Navigation.
The canal reached its peak for tonnage carried in 1910, but by 1922 traffic had declined to the point where an act of closure was passed.
Much of the former canal is covered over and the infrastructure destroyed, though its line can still be seen in fields at Windhill and Shipley.
sally.cope@ypn.co.uk