In the first half of the 20th century, the disadvantages of the East Coast Main Trunk route through the Karangahake and Athenree gorges became starkly apparent.

In 1913, a 3.2 km tunnel was suggested, and in 1920 a survey was requested for a Kaimai rail route, though it would be many years before this happened.

Maunganui from the Waikato including a 4 km tunnel, an idea that was enthusiastically supported by Federated Farmers, and later local news media.

A report that had been prepared on the subject stated that there was an insufficient volume of guaranteed traffic then or in the near future to justify the project at that time.

In 1960, a deputation met with the Minister of Railways in order to impress upon him the importance of a replacement for the existing route, and as a result, a Commission of Inquiry was established in August 1962 to investigate "Improved Access by Land to the Port of Tauranga and Bay of Plenty".

The Chief Civil Engineer remarked at the time that the deviation would be an advantage to the whole North Island railway system, shortening the rail distance between Tauranga and Hamilton by 51.5 kilometres (32.0 mi), and the rail distance between Rotorua and Tauranga by 100 kilometres (62 mi).

Rock samples were submitted to the manufacturers (Jarva Company) for an assessment of the suitability of the machines for the tunnel project.

The Jarva tunnelling machine was purchased and imported from the United States in 1970 at a cost of $1.4 million, a decision considered adventurous at the time as a TBM had not been used on this type of geology before.

[3] Despite concerns about starting at the western portal with the TBM, it was considered to be the better option to alleviate problems with drainage that would ensue otherwise because of the 1:300 ascending grade from west to east.

Construction of the tunnel started at the western end on 15 January 1969 with the excavation of the approach cutting which reached 25 m deep at the portal.

By the end of the trial period, the TBM had only advanced 106 metres (348 ft) and was wearing out far more quickly than was hoped, so it was decided to dismantle it and move it to the eastern portal.

The profile of the western end, which had been round to accommodate the TBM, was changed to a horseshoe shape to better suit conventional tunnelling procedure.

Ducted ventilation was initially sufficient for the machine and the workers in the tunnel, but the closer the excavation got to the midway point, the more the temperature increased.

Though the official hole-through ceremony had been planned for 17 June, the dignitaries had to be content with shovelling some of the rubble as the TBM had again jammed with loose rock.

Once this was finished, the concrete track bed was laid by the private contractor Robert McGregor and Sons of the United Kingdom.

This method was chosen rather than the traditional ballast and sleepers to reduce maintenance costs for the track inside the tunnel.

[5] The first official train through the tunnel was the Silver Fern railcar RM 3, which departed Hamilton railway station for Tauranga on 12 September 1978.

[6] After a lunch stop at Matamata, Prime Minister Robert Muldoon greeted the assembled crowd and boarded the train.

Then the Prime Minister gave a speech and unveiled a plaque paying tribute to the four workers who had lost their lives.

The train proceeded to Tauranga with the official party and minus the school children where several civic functions were held.

Regular passenger trains to the Bay of Plenty had ceased in 1967 with the final running of a post-Taneatua Express 88 seater railcar service; the lengthy and time-consuming route that the tunnel replaced was part of the reason this railcar service had ceased to be viable.