Because of the terrain conditions and for cost reasons, Localbahn-Bau und Betriebs-Gesellschaft Wilhelm Hostmann & Co. from Hanover was awarded the contract to build the 1000 mm gauge railway.

Services were initially hauled by three powerful steam locomotives called Gernerode, Harzgerode and Selke.

Because of the increased demand for both passenger and freight traffic, three more steam locomotives had been put into service by the turn of the century, the Güntersberge, the Alexisbad and the Hasselfelde.

In the spring of 1946, the Eisfelder Talmühle–Hasselfelde and Herzogschacht–Lindenberg sections of the Selke Valley Railway were dismantled and almost all the rolling stock and track material was sent as reparations to the former Soviet Union.

Because of its importance for the transport of fluorite, reconstruction began in the autumn of 1946 between Gernrode and Lindenberg (now Straßberg), which dragged on because of lack of material until 1950.

In 1983, the reconstruction of the Straßberg–Stiege section was approved, especially to ensure the supply of lignite from Nordhausen to the new cogeneration plant of Silberhütte.

The railway supervisory authority of Saxony-Anhalt approved operations over the line on 17 February 2006 and it was opened on 4 March with festivities and special trains.

Since various remaining works had to be carried out, only a few special trains operated until the start of scheduled passenger traffic on 26 June 2006.

The line runs past the halt (Haltepunkt) of Osterteich, next to the artificial pond of the same name, and through the Ostergrund.

The connecting line to the Harz Railway runs from Stiege station up to the highest point at 523 metres above sea level near the halt of Birkenmoor and then downhill through the Bere valley.

Since April 2010, steam trains have also run regularly on the connecting line (Stiege–Eisfelder Talmühle); before 1996 it was exclusively served by diesel multiple units.

Today, scheduled freight trains operate on the Selke Valley Railway only on the short section from the Hartsteinwerk Unterberg to Eisfelder Talmühle station: the Hartsteinwerk Unterberg regularly transports standard gauge gravel wagons on Rollbocks to the transfer yard in Nordhausen (Harz Railway).

There are two converted diesel locomotives of class 199.8 available and equipment for transporting standard gauge freight cars.