The Maritime Commission authorized the line in June 1942 over two competing proposals and construction began that August.

It was built quickly with available materials, including rails reused from other lines and a bridge constructed from old turntables.

Connections could be made there with Key System routes A and B, which turned south on Louise Street, outside of fare control.

The line ran east on 40th Street (on the south side of the Key System mainline) to San Pablo Avenue, where a pair of fare controlled platforms were located; connections could be made there with other Key System routes outside of fare control.

[1][2] Splitting from Ninth Street, it crossed Codornices Creek and ran diagonally northwest on a private right-of-way across Albany Village, a federal housing project for war workers.

[7] Express trains at shift changes served only the shipyard stops and the Key System transfer points at 40th Avenue.

[10] An alternate proposal by a business association would have used existing Western Pacific Railroad, SP, and Santa Fe Railway tracks.

[11] Timbers were reused from the Key System Mole (pier), which had been abandoned after the completion of the Bay Bridge.

[5][6][17] This completion allowed most bus service to the shipyards – which used scarce gasoline and tire rubber – to be discontinued.

[6] Built for 50,000 passengers a day, the Shipyard Railway only operated at 20% capacity; it was heavily used at shift changes but poorly used at other times.

"[18] The line was "half a century out of date the day it opened"; the old wooden cars rode roughly and had uncomfortable seating.

[12][4]: 85 For unknown reasons, the Maritime Commission did not acquire rolling stock from the IER or the Northwestern Pacific Railroad interurban lines, which had also been abandoned in 1941.

These wood-bodied cars had been built in 1887 for the IRT Second Avenue Line as coaches pulled by steam locomotives.

[20][21] The elevated cars were purchased by the Maritime Commission in June 1942 and overhauled in the Key System's Emeryville shops that August.

[19][22] Local trains were operated with Key System "bridge units" until a small number of the elevated cars were refitted with folding steps to allow them to serve street-level stops.