The idea of building the railway came from António Joaquim Marques, who obtained permission from Funchal city council on 17 February 1887.

[6] In 1893 the Belgian-made rolling stock arrived[3] and service started on 16 July[4] between Pombal and Levada de Santa Luzia, witnessed by the governor-general, the bishop, and other Madeira notables.

[1] This part of the line required costly cut-work into the hillside to reduce the grade to operable levels even for a rack railway.

[4] The trade journal Gazeta dos Caminhos de Ferro noted in their 16 September 1903 issue that some locomotives were in bad repair, for which reason the local government ordered the company to take all means necessary to guarantee the safety of the public.

In their general assembly on 12 July 1910, the Companhia do Caminho de Ferro do Monte decided to extend the line further to Terreiro da Luta.

[9] The first train arrived at Terreiro da Luta, 850 m above sea level, on 24 July 1912, making the line's total extent 3,911 m.[1] At the summit station, the company opened a 400-seat panoramic restaurant, whose food quality was, reportedly, competitive internationally.

[4] Despite improvement in the financial situation of Caminho de Ferro do Monte, it was unable to raise enough capital to replace its rolling stock, which was showing serious signs of wear.

In October of 2003, the Funchal city government announced a public tender for the reconstruction of the Monte Railway — a "heritage asset" according to it.

[4] A joint project emerged from the tender involving the Funchal city government and the company Teleféricos da Madeira.

[11] The project involves building a funicular between the former stations of Terreiro da Luta and Monte along the old railway alignment.

In 2020, the Funchal city government acquired the old station at Monte for renovation and conversion into an historical and cultural information center.