5 ft 3 in (1,600 mm) railways entered Minas Gerais in the 1870s, pushing towards the city of Belo Horizonte.
In 1872 Provincial President Dr. Joaquim Floriano de Godoy signed into law approval for a narrow-gauge railway from the broad-gauge line heading west towards a navigable point on the Rio Grande.
The exact reason for the choice of gauge is not known; one theory is that an American engineer was familiar with the Ferrocarril de Antofagasta a Bolivia in Chile.
The line was opened through to São João del Rei on 28 August 1881 by the Emperor Dom Pedro II.
The company sought permission to extend the railway and over the subsequent 15 years built a number of extensions until it reached Paraopeba.
By April 1900 the company was in liquidation, and a month and a half strike by employees was only halted when the State government paid their back pay.
The line headed west from the junction at Antonio Carlos, through São João Del Rei, to Aureliano Mourão.
A branch ran from Aureliano Mourão south-west to the head of navigation on the Rio Grande at Riberao Vermelho.
The EFOM met the Rio Grande at Riberao Vermelho, from where the railway ran a steam navigation service down the river for 208 km, as far as Capetina.
A decision was made to turn the substantial station, workshops and roundhouse in São João del Rei into a railway museum.
Fourteen locomotives, as well as the remaining rolling stock was brought to São João del Rei, together with a number of items of metre gauge equipment.