The line was originally opened in 1878 as the Myles Branch Tramway, a horse-drawn wagonway connecting the Snowdon Iron Mine to the Victoria Railway a few miles away.

This extension was never built; instead, the company rechartered as the IB&O and used the Tramway as the basis for a new line with the ultimate aim to connect Orillia to the Ottawa area.

The line was eventually purchased by Mackenzie and Mann in 1909, who connected it to the Central Ontario Railway (COR) outside Bancroft in July 1910.

The IB&O leased the COR, and then both were merged with Mackenzie and Mann's Canadian Northern Railway (CNoR) in 1911.

At the time, the only form of transport was via the waterways to railheads some distance to the west, and this limited shipping to the summer months.

In 1866, they constructed 14 kilometres (8.7 mi) of railway from Blairton to the Trent River, using the ever extending Trent–Severn Waterway to move the ore by boat to their previous railhead on Rice Lake.

[3] A small railway boom followed and lasted into the early 1870s as a number of companies started projects attempting to service the mines.

Railways and colonization roads led easier access for prospectors, allowing them to strike out further into central Ontario.

It was Campbell who discovered high-quality examples on land belonging to Robert Gibson, but the company formed to exploit this discovery was owned by Robinson and two people from Toronto named Shertis and Savigney.

[6] With the T&N stalled, in 1874, George Laidlaw, who had been instrumental in setting up the T&N, chartered the competing Victoria Railway with roughly the same goals.

[7] William Myles, "an Irish born coal dealer from Toronto", purchased a share of the Snowdon and began plans to build a railway connection to the Victoria, a little over 6 miles (9.7 km) from the smelters that had been built at Furnace Falls on the Irondale River in 1874.

[4] Perry and Mills began construction of a pig iron upgrading furnace and then ran out of money, only to have much of it burn down in 1881.

[9][failed verification] On 25 March 1884, the two rechartered the line as the IB&O, this time planning to use the Snowdon Branch Railway as the basis for a new line running from Orillia to Ottawa, a distance of about 225 miles (362 km), with options to build branches northeast to Sault Saint Marie and west-southwest to Brockville.

In this leapfrog fashion they reached Gooderham and claimed the bonus, but left the train abandoned until further supplies arrived.

[9] The railway reached new mining areas just as it was being discovered that the ore had a high sulphur content, which made it difficult to refine.

By this time, woodcutting was reaching a peak in Ontario and the railway found considerable business servicing various sawmills that were springing up in the area.

Lash was the General Manager of Bank of Commerce, who held most of the debt for the line, and was also a lawyer for Mackenzie and Mann's CNoR.

CNoR provided the funding needed for the remaining 5 kilometres (3.1 mi) from Mud Creek to York River, where the IB&O connected with the COR just north of Bancroft on 1 July 1910.

[12][d] The IB&O had been cheaply built and was subject to constant derailments, so the CNoR began upgrading the line while limiting speeds along considerable lengths to only 15 miles per hour (24 km/h).

Canadian Northern completed its transcontinental line to the Pacific on 23 January 1915, producing a network reaching across the country.

[15] A short section west of the wye connection with the COR was used as a spur line to the local Domtar flakeboard plant.

The IB&O ran roughly eastward out of Myles Junction to Furnace Falls, where it turned almost north to a point just short of Irondale.

At Harcourt the line turns more east-northeast to Hughes, and then east to the final connection with the COR north of Bancroft.

[17] After 1919, the service on both the IB&O and the Grand Trunk became tri-weekly Mondays, Wednesdays and Fridays, and in 1934 to Tuesdays, Thursdays and Saturdays.