To become one of the world's most innovative countries, Canada requires a national innovation strategy for the 21st century. It is progressing toward a more innovative economy, but lags behind many developed countries in terms of overall innovation performance. A national innovation strategy to meet Canada's innovation challenge proposes goals, targets, and federal priorities in these three principal areas: knowledge performance, skills, and innovation environment. The public and private sectors in Canada need to address the knowledge performance challenge by creating and using knowledge strategically to benefit Canadians, i.e. promoting the creation, adoption, and commercialization of knowledge. To address the skills challenge, Canada must increase the supply of highly qualified people, thereby ensuring the supply of people who create and use knowledge. Canadians need increased confidence to adopt innovation. To meet the innovation environment challenge, Canada must work toward a better innovation environment; it must build an environment of trust and confidence, where the public interest is protected and market-place policies provide incentives to innovate. These three elements come together at the community level; Canada must stimulate creation of more clusters of innovation at the community level. The government must engage provincial and territorial governments and business and academic stakeholders to contribute to a national innovation strategy. (YLB)