The naval ensign, a white flag with the Canadian Maple Leaf flag in the top corner closest to the mast and a blue navy badge in the outer half, will now fly from the mast of warships at sea.
The regular Maple Leaf flag will now be designated as the navy jack, which means it will fly from the ship's bow when it is tied up at a dock or buoy.
Essentially, the change merely switches the positions of the two flags.
Vice Admiral Paul Maddison, the head of the navy, says it is important to naval heritage, because warships have traditionally flown a special ensign to signify their status.
Canadian warships flew the white ensign of Britain's Royal Navy from 1910 to 1965, when it was replaced by the then-new Maple Leaf.
"A distinctive naval ensign is a flag that distinguishes Canadian warships from other Canadian flag vessels or from ships of foreign navies," Maddison said.
"It recognizes that our warships have special status under international maritime law."
The new ensign will be flown starting this weekend on Battle of the Atlantic Sunday.
The first vessel to hoist the flag will be HMCS Toronto, a frigate deployed in the Indian Ocean.
It's the third navy tradition resurrected in recent years. In 2010, navy officers were given a special tweak, the "executive curl," on their rank stripes.
In 2011, the navy got its "Royal" designation back.