The railway is owned by Sir Handel Brown and is formerly run by Mr. Roger Sam, son of the previous controller, Mr. Peter Sam. The line was inspired by and based on the Talyllyn Railway in Wales, where the Reverend W. Awdry worked as a guard in the 1950s.
In 1806, a plate way utilising gravity running from Ward Fell to Balladswail and connecting with the Sodor and Mainland Railway was opened. Following the modernisation of the Ffestiniog Railway in 1863, James Spooner was hired to plot a trackbed for a narrow gauge line. It was also planned to develop passenger traffic for tourists travelling to the springs at Skarloey, where there would be hotels and guest houses. 2 steam engines were ordered from Fletcher Jennings and Co., and carriages from Brown Marshall. The numbers of summer visitors dropped after signs of their copper traffic declining, but when slate was found a new source of traffic arose. After World War II, however, hard times had come and the mines had become ammunition dumps. Fortunately, tourist traffic increased after the discovery of the Book of Sir Harold at Ulfstead Castle, which revealed that Skarloey was his secret sanctuary, with archaeological evidence proving so. The railway was then able to purchase 2 disused engines from the aluminium works at Peel Godred for a total of 50 pounds.
In 1965, a loop line around Skarloey lake was opened to celebrate the centenary of the railway.
The Skarloey Railway starts at Crovan's Gate and continues to Cros-ny-Cuirn, Glennock and Rheneas before terminating at Skarloey. The new lakeside loopline extension has one station, appropriately named Lakeside. The line's main traffic consists of passengers and slate. It also starts at the wharf, where it meets the North Western Railway, and climbs through the mountains, past the lake and through the forest to the Transfer Yards, where it meets the NWR again.
From there, the railway climbs up and over a mountain and several gorges up to the summit of Culdee Fell, where a mountain village is located. There are also several branchlines linking the coal mines and the slate mines.
In the television series, the Skarloey Railway starts at Crovan's Gate near the Steamworks and follows the Railway Series route until the loop around the lake. It continues west from Skarloey to the Blue Mountain Quarry and then crosses The Peel Godred Branch south of Kirk Machan. After crossing the line it terminates in Ulfstead. Here it connects with the Maron-Arlesburgh Branch Line.