The museum is operated by two partner organisations: The heritage-listed locomotive depot was constructed in 1913 when the duplication of the Main Western railway line between Emu Plains and Glenbrook was completed.

[3] The depot at Valley Heights consisted of a locomotive yard, a 10 bay roundhouse, 18.3-metre (60 ft) turntable, an elevated coal stage, and water tanks and columns.

During the peak of the steam era, an average of 30 trains during any 24-hour period required banking from Valley Heights to Katoomba.

Milestones included: In 1994, the Blue Mountains Division of the New South Wales Rail Transport Museum (now Transport Heritage NSW) established the Valley Heights Locomotive Depot Railway Museum, with the aim of preserving the depot to provide historical, educational and recreational facilities and opportunities for the benefit of the Blue Mountains community and visitor to the region.

Together with the Valley Heights railway station, the locomotive depot was listed on the New South Wales State Heritage Register on 2 April 1999.