Multi-million pound regeneration plans to build 120 houses and flats on the site in Ditherington would see the former canal route covered in grass.
But Shrewsbury & Newport Canals Trust said restoring the canal would bring a welcome visitor boost and enhance the area.
Trust member Alistair Price said: "This site is of worldwide importance as it has the world's first iron-framed building, from which all skyscraper technology has followed.
"And this was built here beside the canal to enable raw materials to be brought in and finished produce to be transported out via the canal.
"If Shropshire Council made it a condition of any planning permission that is granted to restore this section of the canal, it would greatly enhance the development and provide a major start to restoring the Shrewsbury Canal."
Mr Price highlighted local authorities in Banbury, Birmingham, Leeds, Liverpool and Manchester which he said benefitted from the restoration of their canals, which provided a safe towpath route for pedestrians and cyclists.
He said the site would "significantly help to attract visitors to its visitor centre when it is opened and help bring much-needed income to the local economy".
The proposals for the historic building also include two new business premises along with the renovation of numbers one and 15 Haughmond Square, currently occupied by takeaway businesses Chilli Spice and Spring Garden.
Historic England, which owns the mill buildings and surrounding land, pulled back on plans to acquire the takeaways through a compulsory purchase order and said it will continue negotiations with the current owners instead.
The outline planning application sets out how the residential aspect of the scheme could take shape and shows terraced houses and two blocks of 30 apartments.
The planning application will be decided by Shropshire Council.