The problem of ship steering in canals and confined waters is analyzed with emphasis on stability and bifurcation analysis. The classical maneuvering equations of motion augmented with a model for ship/canal interaction are used to model the open loop dynamics. Coupling of a control law and a guidance scheme with appropriate time lags is employed to model the essential dynamics of a helmsman. The complete system is analyzed using both linear and nonlinear techniques in order to assess its stability under finite disturbances. The results indicate that for certain regions of parameters, limit cycle oscillations may develop which could compromise system stability and safety of operations.