"narrow valley between cliffs," 1834, from Mexican Spanish cañon, extended sense of Spanish cañon "a pipe, tube; deep hollow, gorge," augmentative of cano "a tube," from Latin canna "reed" (see cane (n.)). But earlier spelling callon (1560s) might suggest a source in calle "street."
This use of the word cañon is peculiar to the United States, it being rare in Mexico, and not at all known in Spain or in Spanish South America. [Century Dictionary]