Until the opening of the Chinese Section, traffic on the KCR was limited, as there was little demand for passenger and freight services by the inhabitants of the then undeveloped New Territories. After 1911 traffic increased over the years until services were disrupted by the Japanese invasion of Hong Kong during the Second World War.

Following the end of the war, traffic quickly recovered but through-train services for both freight and passengers were again halted on 14 October 1949, the day prior to the People's Liberation Army's capture of Canton from the Nationalist forces. Until 1951 both passengers and freight had to be transshipped at Lo Wu between separate trains operating on the Chinese and British Sections. In 1951 through-train freight services resumed, but through-train passenger services did not resume again until 1979.

Trains were initially steam hauled, but diesel trains were gradually introduced in the 1950s and by 1962 had replaced all steam trains.

In the 1970s it became clear that a major change was needed if the railway was to cope with future demands both in terms of trade with China and the anticipated increase in domestic passenger demand arising from the Hong KongGovernment's plans to construct large new towns at Sha Tin, Tai Po, Sheung Shui and Fan Ling.

In 1974 a 10-year investment programme was started to double-track and electrify the railway from Hung Hom to Lo Wu, requiring the building of a second Beacon Hill tunnel together with the construction or upgrading of stations and other facilities. The first stage was completed in 1982, with the start of an inner suburban service between Kowloon and Sha Tin in May. On 16 July 1983 the use of diesel trains ceased for domestic passenger services following completion of the remaining section to Lo Wu. Diesel trains are, however, still used today to haul freight.

Prior to 1982, the railway was operated as a Government department but in December of that year the Kowloon-Canton Railway Corporation was created through the enactment of the Kowloon-Canton Railway Corporation Ordinance. The Corporation is wholly government owned and a Managing Board, whose members are appointed by the Chief Executive of the Hong Kong Special Administrative Region, monitors its operations.