This coin design was launched in 1987 amid public criticism over the loss of the $1.00 bill. The design shows a loon swimming across a lake. The coin is multi-sided, with a nickel interior and bronze/aureate coating. The reverse shows Queen Elizabeth. Test tokens for this issue are also known.

Initially, resistance to the coin was high, mostly from older members of the population. The widely held belief that the coin was not needed and was stupid, coupled with the political climate at the time and the series of administrative gaffs leading up to its release all contributed to the coin being named the Loonie, a nickname still in use today. The first issue of the Loon is actually a scarce coin in uncirculated condition, contrary to the customary trend of the second year of issue being more valuable. The public disdain for the coin evidently resulted in few being saved. The Loon dollar coin has also been issued in several commemorative formats and now circulates alongside the new $2.00 coin.

Interestingly, the $2.00 coin did not spark the wide debate that the Loon dollar did, despite the subsequent loss of the $2.00 bill. $5.00 is now the smallest paper bill in general circulation in Canada, although all Government issues of paper money continue to be exchangeable for their full value. Please see the Royal Canadian Mint section for information about special loon designs that did not circulate.