The station opened in 1885 as a stop on a new single-track line built by the North Eastern Railway linking Bishop Auckland to Burnhouse Junction, where it joined the earlier Byers Green Branch[1] built by the Clarence Railway (a predecessor of the NER) in 1837.

[2] Beyond Burnhouse Junction, passenger trains continued over the former CR route to Ferryhill.

However, due to the rural nature of the western section of this new through route, traffic between Spennymoor and Bishop Auckland was fairly light[1] and as a consequence Coundon station closed to passenger on 4 December 1939[3] when passenger services on the line west of Spennymoor were withdrawn.

[1] The station closed completely in May 1948 though freight continued to pass through its site until September 1956.

[3] The trackbed of the railway through Coundon has been converted into the Auckland Walk, a path for walkers and cyclists.