The railway is owned by Sir Handel Brown and is run by Mr. Roger Sam, son of the previous controller, Mr. Peter Sam (currently Mr. Percival in the television series). 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 Balladwail 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. Two 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 two disused engines from the aluminium works at Peel Godred for a total of fifty pounds.
In 1965, a loop line around Skarloey lake was opened to celebrate the centenary of the railway.
The railway was the setting of Four Little Engines, The Little Old Engine, Gallant Old Engine, Very Old Engines, Great Little Engines, and New Little Engine. It also appeared in Mountain Engines and Duke the Lost Engine.
The Skarloey Railway was one of the few railways that made it into the television series. It was introduced in the fourth season and has appeared in every following season, except the eighth, thirteenth, fourteenth, and fifteenth. The railway returned in the sixteenth season in CGI.
In the Railway Series, 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.
The Skarloey Railway was originally used to transport copper from the Ward Fell mines until 1909 when the copper veins ran out. Luckily, in 1900 good slate had been found in the foothills and was mined until the end of World War I when production slumped. Nevertheless, the quarries were kept open by Sir Handel Brown I for the sake of his tenants. During World War II, the Ministry of Defence commandeered the mines for use as ammunition storage/dumps.
In the television series, the Skarloey Railway appears to have taken the routes of the Culdee Fell, Mid Sodor, and Skarloey Railways and joined them as one. It 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 branch lines linking the coal mines and the slate mines.
In the television series, the Bluebell Railway works alongside the Skarloey Railway.
In the CGI 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 where it connects with the private railway at Ulfstead Castle. Here it connects with the Ulfstead Branch Line.
- Every Skarloey Railway engine featured in the Railway Series - barring Duke - has a counterpart on the Talyllyn Railway.
- When the railway returned to the series in CGI, the line became double tracked. This may be due to an increase of passengers and goods.
- On the Thomas and Friends website, the railway is inaccurately listed as a branch line.
- In Season 16, most of the Skaraloey Railway engines gained a Welsh accents.
- According to The Island of Sodor: Its People, History and Railways, in 1924 a locomotive (name unknown) was crossing the steel trestle which was completed in 1909, when it lost control and derailed, plummeting into the water below. Despite the railways efforts, the locomotive was never recovered due to the quicksand like silt.
- Unlike its basis the Talyllyn Railway, the Skarloey Railway has a loop-line near the top station and a tunnel.