In 1926 after a loss of £18,041 the year before, the Great Western Railway sought to close the canal but they were instead charged with improving and maintaining the canal. The cargo trade continued to slow, but pleasure boats began using the canal. During the Second World War the Kennet and Avon Rivers became a second line of defense due to the possibility of invasion, the material used to build the defenses were carried by boats on the canal. When the war ended, the Transport Act of 1947 transferred control to the British Transport Commission, but by the 1950s large sections of the canal had fallen into disrepair. The last passage was made in 1951.

In the 1950s, a group had been set up in support of restoring the canal, later merging with the Inland Waterways Association. In the years following, it took an act of Parliament and a petition to the Queen, brought to her in London from Bristol by water; some parts of the canal only being deep enough for travel by canoe. In 1962, an advisory committee concluded the canal should be redeveloped, that same year the Kennet and Avon Canal Trust was formed in order to restore the canal from Reading to Bristol as both a through way and a public amenity. In April of that year the Trust gained charitable status and on June 6th was incorporated under the Companies Act. The next year the newly formed British Waterways took over the canal with the partnership of the Trust and began restoring the canal.

The work to restore the canal and locks were a collaboration between British Waterways staff and volunteers. In the late 1960s on into the 1980s work on various parts of the canal included puddling, which helped to make sections of the canal that had gone dry to be more water tight. The main concern within Wiltshire was the limited water supply making it to the highest point in the canal. The water problem was solved when the Wessex Water Company agreed to pump 1,000,000 imperial gallons east. On August 8th, 1990, even with worries about an adequate supply of water, Queen Elizabeth II formally reopened the locks while traveling through locks 44 and 43 at Caen Hill on the Trust's boat The Rose of Hungerford. In 1996, new pumps were installed at the top of the Caen Hill locks to address the concerns about water. In 2011 the canal was designated as a national "cruise way" by the Department for Environment, Food and Rural Affairs, meaning British Waterways were legally required to maintain the canal so as to allow traffic safe navigation of the whole canal.