The Vale of Rheidol Light Railway was authorised by the Act of Parliament on 6th August 1897. At the time of building, it was one of the most up-to-date standard of narrow gauge construction, and passed through terrain where it would have been almost impossible to build a standard gauge line without prohibitive costs. The line was authorised as two distinct sections, namely the main line from Aberystwyth to Devil’s Bridge, and a harbour branch.

Start on construction was delayed due to the difficulty in raising capital locally, but finally got under way under the direction of Sir James Szlumper in 1901. Some materials and a locomotive (which was renamed Rheidol) from the defunct Plynlimon & Hafan Tramway were used during the construction. The railway finally opened to the general public on 22nd December 1902.

At the time, it was thought that the building of the railway would bring prosperity back to some of the local lead mines in the area, and indeed some were reopened, the ore was extracted and taken by the railway to Aberystwyth for transhipment by rail or sea. A good trade was also done in timber, which was used mainly for pit props in the South Wales coal mines.