Cowdenbeath finished top and were directly promoted to the 2006–07 Scottish Second Division.
The 2005–06 season saw the introduction of the play-offs in which the ninth placed team of the Scottish Second Division would enter and knock-out tournament with the teams ranked second, third and fourth in the Scottish Third Division.
Berwick Rangers, Stenhousemuir and Arbroath entered the play-offs against Alloa Athletic of the Second Division, who emerged play-off winners and avoided relegation.
Gretna as champions of the 2004–05 season were directly promoted to the 2005–06 Scottish Second Division alongside Peterhead who finished second.
They were replaced by Berwick Rangers, who finished bottom of the 2004–05 Scottish Second Division, and Arbroath respectively.