Go to the People tab in your course and click + Group Set.
It will open a window where you can create the group set name and how the groups will be formed. You can allow students to self-sign-up; picking this option will give you the ability to select the number of groups created and set a cap for the number of students in each group. You can also randomly split the students up, or choose "I'll create groups later" if you want to manually put students in groups. Click Save when you're done.
It will automatically open to the group set tab. If you opted to create your groups later in the last window, click + Group to create, name, and set limits for each group you want in this set.
If adding students to groups manually, you can either click the + next to their name and select a group or click and drag their name over to a group.
Canvas has a great guide on the matter here.
To view your groups, go to the People section in your course. There will now be tabs for any group sets you create. Click the group set tab you want to check on.
Here you can edit group names and members, or delete groups. To view the collaboration page for a specific group, click the three dots next to it and select Visit Group Homepage.
On the group homepage, you can check in on what the group has been working on. You can also post announcements specific to that group, and set up and monitor discussions and collaborations through Google Drive.
It takes a little maintenance, but groups can be a great way to set up group projects for students to work together.