Built by inmates, it was founded in 1883 by the state of Texas to haul raw materials for a smelter at the prison at Rusk.

Built with inmate labor, the original purpose of the railroad was to transport raw materials for the iron smelter located at the Rusk Penitentiary.

However, by 2006, the train cost the state of Texas $1 million per year more to maintain and to operate than the revenue from the park generated.

In addition to continuing passenger operations, Iowa Pacific Holdings opened the track to the main line in Palestine on November 1, 2012, to begin offering freight services.

The schedule of the railroad allows visitors to ride trains pulled by antique diesel and steam locomotives between the park's Victorian-style depots and through the forests of East Texas.

[8] The Texas & Eastern interchanges with the Union Pacific at Palestine, and carries primarily construction aggregates, industrial products and chemicals.