In 1986 Marine Atlantic was established to provide ferry services in Atlantic Canada which had previously been operated by CN Marine.
During the 1990's the Government of Canada slashed funding across the board which caused downsizing of Marine Atlantic's operations, precipitated by the 1997 opening of the Confederation Bridge which replaced Marine Atlantic's most heavily used ferry service, the constitutionally-mandated ferry to Prince Edward Island.
Later in 1997, the company transferred the operation of its Bay of Fundy and Gulf of Maine ferry services between Saint John, New Brunswick-Digby, Nova Scotia and Yarmouth, Nova Scotia-Bar Harbor, Maine to the private-sector company Bay Ferries Limited, a subsidiary of Northumberland Ferries Limited.
That year also saw Marine Atlantic remove itself from the provision of coastal ferry services in Newfoundland and Labrador with the transfer of operations to the provincial government at the end of the 1997 shipping season.
This agreement was reached between the federal and provincial governments in exchange for federal funding to extend regional roads such as the Trans-Labrador Highway to service coastal communities.
These coastal ferry services had been initiated by the Newfoundland Railway and were assumed by Canadian National Railways, following the province's entry into Confederation in 1949, although they were not constitutionally mandated. Also in 1997 Marine Atlantic sold off its Newfoundland Dockyard, located in St. John's, Newfoundland to a private operator. The dockyard built in the 1880s was at one point in time owned by the Reid Newfoundland Company, then in 1923 was taken over by the Newfoundland Railway company. when Newfoundland joined Canada ownership passed to Canadian National.