The idea of constructing a railway between Hong Kong and Mainland China was first put forward as early as 1864 by a British railway engineer, Macdonald Stephenson, who had played an important role in the initial development of railways in India. Unfortunately he found little support from either the Imperial Chinese Government in Peking or most of the prominent businessmen in Hong Kong, and the idea was not given further serious consideration for about the next 30 years.

The idea re-emerged in the 1890s as a result of the various European powers competing to extend their influence in China. The British Government was particularly concerned about competition from the French in Southern China, and obtained a number of railway concessions from the Imperial Chinese Government for the British & Chinese Corporation, a joint venture formed in 1898 between the trading company of Jardine Matheson & Co and the Hong Kong and Shanghai Bank. These concessions included the right to construct and operate a railway from Kowloon to Canton.

While some preliminary survey work was undertaken, obtaining funds to construct the railway proved difficult. In late 1904 it was decided that the length of railway within Hong Kong, from Tsim Sha Tsui to Lo Wu (the British Section), would be constructed by the Hong Kong Government, leaving the rest of the railway from Lo Wu to Canton (the Chinese Section) to be constructed by the British & Chinese Corporation.

Following detailed surveys to decide the final route of the railway, the Public Works Department of the Hong Kong Government started construction of earthworks on the section from Tai Po Market to Fan Ling in December 1905.

Construction of the railway proved more difficult than first thought due to obstacles such as shortages of skilled labour, a high rate of sickness in the workforce from malaria, beri beri and dysentery, and the difficult ground conditions encountered in building the Beacon Hill Tunnel. The Kowloon-Canton Railway (KCR) finally came into service on 1 October 1910 as a single track system.

At that time, KCR trains could run only on the British Section. It would not be until one year later on 5 October 1911 that the Chinese Section to Canton was completed, only 5 days before the outbreak of the 1911 Revolution that ultimately led to the abdication of the last Qing Emperor in 1912.