The original line was opened in 1900 to serve the local farming and timber community. It ran from Upper Ferntree Gully station, the terminus of the broad gauge line from Melbourne. The section of the line from Upper Ferntree Gully to Belgrave is operated by Metro Trains Melbourne suburban electric trains, which was rebuilt to 5 ft 3 in (1,600 mm) gauge between 1958 and 1962.[1]

The railway had attracted a number of colloquial names locally before Puffing Billy became the dominant one. Services stopped in 1953 after a landslide blocked the line between Selby and Menzies Creek, and it was formally closed in 1954.[2] At the end of 1954, the Victorian Railways sought to minimise their financial risks if the railway was to reopen. Harold L. Hewett, a teacher at Melbourne Grammar School, organised a rally attended by 400 people at Upper Ferntree Gully station on 4 January 1955 to try to save the railway.

Following closure, a few farewell specials operated on the remaining usable section to Belgrave, and these proved very popular. On 1 October 1955, the Puffing Billy Preservation Society was formed to keep the railway running indefinitely. They operated trains to Belgrave until 1958 when services again ceased for conversion to a broad-gauge, electrified suburban line. The society started work on restoring the Belgrave to Lakeside section. Rover Scouts attending the 7th World Rover Moot held at Wonga Park assisted in the clearing of the line between Belgrave and Menzies Creek as part of the event's community service component.[3] On 28 July 1962 trains resumed running between Belgrave and Menzies Creek.[4]

Operations were extended over the remainder of the original line, opening to Emerald on 31 July 1965 and Lakeside on 18 October 1975 before reaching Gembrook, which was opened on 18 October 1998. The first trains to Gembrook carried children from the primary schools along the Belgrave–Gembrook corridor, two of which directly adjoin the railway and the remainder not more than a street away. [5][6][7]

The railway operates daily (except for Christmas day) between Belgrave and Lakeside, with services to Gembrook on Sundays. Its infrastructure is restored and recreated to reflect the heyday of the line between 1900 and 1930, and is operated with some of the railway practices from the Victorian Railways of that era, such as using the "Staff and Ticket" safeworking system. In the 2016/17 financial year, Puffing Billy carried 487,237 passengers, up more than 60,000 from the previous financial year.[citation needed]