The railway between Carlsruhe and Daylesford was opened in two sections during 1880. The first section between Carlsruhe and Trentham opened on the 16th of February 1880 with an intermediate station at Tylden. The second section of the line was opened on the 17th march 1880 with an intermediate station at Bullarto, the current terminus of the CHTR. Fern Hill station between Tylden and Trentham also opened on this date. Other stations opened were Lyonville between Trentham and Bullarto on the 14th June 1880 and Musk Creek (later shortened to Musk) in September 1881. The main produce carried on the line was potatoes and firewood. Passenger traffic was also quite high in the early years with 50,000 passengers recorded in 1884.

A Daylesford to Ballarat train crosses the Jubilee lake bridge in the early 1920's. This section of the former North Creswick to Daylesford line was closed in 1953, but the bridge still exists. (Photo Harry Miller - John Cleverdon collection)

With the apparent sucess of the Carlsruhe to Daylesford railway attention soon turned to connecting Daylesford with Ballarat. After numerous schemes to connect the two localities, a railway was finally opened on the 19th of January 1887 between North Creswick on the Ballarat to Maryborough line and Rocky Lead (later renamed Rocklyn), an extension to Daylesford was opened on the 1st of June 1887. Stations on this line were located at: North Creswick (Junction), Broomfield, Allendale, Kingston, Newlyn, Rocky Lead, Wombat, Leonard's Hill (later renamed Leonard), Ballan road (later renamed Sailors Falls), Woodburn and Daylesford.

The Daylesford to North Creswick railway was closed in July 1953 when it's once a fortnight mixed passenger/ goods train was withdrawn. The Carlsruhe to Daylesford railway lasted another 25 years until falling track standards led to the replacement of the railmotor service with a road coach. The line was closed to all traffic on the 3rd of July 1978.

On the 27th of June 1980 the Central Highlands Tourist Railway was formed and the long task of restoring the railway to operating condition commenced. During the mid to late 1980's, Gangers trolley's conveyed passengers on short trips to the Wombat forest about halfway between Daylesford and Musk. On the 15th of September 1990 railmotor services were restored between Daylesford and Musk for the first time in 13 years. The section of line between Musk and Bullarto was reopened on the 17th of March 1997. In early 2002, The Central Highlands Tourist Railway adopted the trading name of Daylesford Spa Country Railway.

63RM at the 74mp stop board following the 2009 bushfires.(Photo Barry Fell)

On the evening of 23 February 2009, bushfires in the Daylesford region burnt out 1.6 km (1 mile) of track between Daylesford and Musk, with approximately 2000 sleepers totally destroyed along with the pit logs. Services resumed two weeks later on 8 March between Daylesford station and the 74 milepost at the edge of the fire damaged section.

Following the completion of reconstruction works through the forest, test runs to Musk were operated on 14 and 15 August 2010, with a formal re-opening of the line to Musk on 29 August 2010. At the time of writing (July 2011), services remain suspended between Musk and Bullarto.

In December 2011, a new rolling stock storage shed was constructed on the former Ballarat line formation behind the East St industrial estate. Approximately 500 meters of track was relaid along the formation and into the shed, plus two turnouts.

A more in-depth history of the railways in the Daylesford area can be found in "Timber, Spuds and Spa" by Murrell Osborne and is available from the DSCR at Daylesford.