Canalou was settled in 1902 when the Gulf branch of the St. Louis and San Francisco Railroad was constructed through the region. Like many towns in Southeast Missouri, it prospered in its early years chiefly through the cutting and clearing of timber, with a major sawmill, owned by a gentleman named Stansfield, operating in the community for some time. The origins of the name "Canalou" are not clear; one explanation attributes it to an old Indian term, but this is unproven.
Canalou is located in northern New Madrid County at the western end of Route H, close to the border with Stoddard County. It is about ten miles southwest of Sikeston. Its exact coordinates are 36°45’16”N 89°41’13”W.
The city has a total area of 0.20 square miles, and an average elevation of 289 feet. The Little River, draining much of Southeast Missouri, is about two miles west of Canalou.
At the 2010 census, Canalou had a total of 338 inhabitants, grouped into 114 households, with a population density of 1,690.0 people per square mile. This figure represented a slight decrease from the 2000 census, when Canalou had a population of 348. 96.15% of the inhabitants were White, 1.18% were African-American, 0.89% were Native American, and 1.78% were from two or more races. Hispanics of any race were 0.59% of the population.
The median age in Canalou was 32.0 years, with 31.4% of inhabitants under the age of 18, 9.6% between 18 and 24 years old, 29.0% between 25 and 44, 21.8% between 45 and 64, and 8.0% 65 years old or older. The sex ratio was 51.2% male, 48.8% female.
According to the 2010 American Community Survey, the median household income in Canalou was $27,813, and the median family income was $40,313. The unemployment rate was 8.3%. The per capita income was $13,978. About 15.7% of the population lived below the poverty line, including 15.2% of people under the age of 18 and 7.1% of people 65 years old or older.
Like most of the county, Canalou is served by the New Madrid County Central R-I School District. The closest school building is Matthews Elementary School, located in Matthews.