McConnel set about improving Bryn Eglwys to increase its output. In 1865 his company earmarked money for the construction of a narrow gauge railway connecting the quarry with the port of Aberdyfi. The standard gauge Aberystwyth and Welsh Coast Railway was expanding rapidly from its base at Machynlleth however. In 1863 this railway had reached Tywyn, so McConnel decided to build his line from the quarry to Tywyn. This was the nearest point where slate could be transferred to the standard gauge railway. This was despite the line's initial isolation from the rest of the system because of difficulties in bridging the estuary of the Afon Dyfi to the south. An Act of Parliament (28 and 29 Vict, cap cccxv) allowing the company to operate passenger trains as a public railway was given Royal Assent on 5 July 186., The company appointed James Swinton Spooner as engineer for the construction. He laid out plans for a relatively straight line climbing steadily from Tywyn to the quarry and work quickly got underway. By September 1866 construction had advanced to the point where the Board of Trade inspector Captain Henry Tyler could make an initial inspection and report.
Tyler's report led to an unusual alteration. It was discovered that the loading gauge of the line was too small. The internal width of the overbridges was only , but the railway's passenger carriages were wide. This left less than clearance on either side, which was less than the minimum required clearance of . To alleviate this problem, McConnel proposed that the doors on one side of each carriage be permanently barred and the track slewed off-centre beneath the bridges. This would allow adequate clearance at least on the side with doors and mean that passengers could get out of the carriages if the train stopped underneath a bridge. Tyler agreed to this arrangement, and to this day all carriages on the Talyllyn have doors on one side only, an unusual feature for a public railway. This feature is however shared with the neighbouring Corris Railway, though for different reasons. Tyler also required that improvements be made to the railway's first two steam locomotives, as locomotive No. 1 suffered from excessive "vertical motion" and No. 2 was said to suffer from "horizontal oscillation". No. 1 was returned to its manufacturer where a set of trailing wheels was added to reduce the rear overhang. The springs on No. 2 were adjusted and the crank pins shortened to reduce its oscillation.
The railway opened with two locomotives, one was a carriage and the other carried goods. They were ran under a "one engine in steam" rule to make sure they did not crash into each other. At the beginning, locomotives were kept in a shed made of wood at Ty Dwr at the Abergynolwyn station. This was when the main engineering department of the Tayllyn was being built at . The engineering department opened up on February 17 1867.
When Talyllyn opened there were two train stations it visited, one at Pendre and the other at Abergynolwyn. In 1867, the station at opened. In 1873, and stations opened. Eventually, a line that ran from the Abergynolwyn station to the actual village of Abergynolwyn was opened. People could take an incline down a hill from the station to the town. From there, people could take a one of the many trams that ran through the village. Supplies like coal, building materials, and other things were sent down the incline from the train station to the village.
The railway used steam locomotives when it opened. The two original locomotives were made by Fletcher, Jennings & Co. of Whitehaven in Cumbria. Both of them are still used today but many of the parts inside and outside have been replaced. Talyllyn has a rare gauge. This is thought to match the gauge at Corris Railway. The locomotives at Talyllyn might be the oldest of their kind for making sure they fit that type of gauge. The locomotives, "Talyllyn" and "Dolgoch" used to carry slate from the quarry at Tywyn. It also carried other things. Trains that carried people, called passenger trains, traveled between Abergynolwyn, Dolgoch and Pendre. Men who worked on the quarries also traveled on trains, despite those trains not being able to be used by the public. Those trains traveled from Abergynolwyn to Alltwyllt and into Nant Gwernol.
The line was very successful when it opened. As of 1880, 300 people worked in the local slate industry. Over of slate was sent by train each year. Over 11,500 people first road the trains in 1867. By 1877, over 23,000 people were using the train.
Starting in the 1880s, the "Grand Tour" was popular with people visiting the area, called tourists. People could take the Talyllyn and Corris trains and go through Tal-y-llyn Lake and Cadair Idris. Then, when they returned, they could use Cambrian Railways trains. The need for slate slowed down for the last twenty years of the 1880s. Many quarries fired people or closed. Even the quarries that dug up more slate due to other quarries closing often closed eventually. This made the need for the trains less, and made the railroad companies make less money.
Eventually, the biggest quarry in the area, Bryn Eglwys closed. Most of the people who had jobs in Abergynolwyn worked at that quarry. Many people were hurt by the closure. A man who lived in Abergynolwyn, named Henry Haydn Jones bought Bryn Eglwys. He also became a MP for the Liberal representing Merioneth. The quarry, which had closed, reopened in January 1911. Haydn Jones had no money to put into the quarry. But, when workers started mining in the quarry they pulled slate from the "Broad Vein" section. That section had slate that was very hard. It was not popular and most people did not want to buy it. They stopped getting slate from the Broad Vein and started getting slate from the "Narrow Vein," which had slate that was softer and that people wanted to buy. It was very expensive to build a new mind in the Narrow Vein. So, to save money, Haydn Jones made very small entrances into the mine, which were considered unsafe by many people. The sales of slate rose during World War I because people started building new buildings after they were destroyed in the war.
After the war ended, and after 1920, people started traveling more to see the sights of Britain. The number of people who wrote on the Talyllyn rose and places that once stored slate were used to seat people, instead. Tourists could even rent slate wagons, which were used to transport slate only, as a fun thing to experience. A Gravity railway was used to move people on the wagons. People were no longer able to ride in the wagons as of the 1930s. Tourists brought more money into the area and helped the railway survive, but, Haydn Jones never made money.
The rental contract on Bryn Eglwys ended in 1942. But, Haydn Jones could renew it each year. People were still visiting the area as tourists. In October 1942, two return trains ran on Monday, Wednesday and Friday. The trip was 45 minutes long one way. They did not let people ride the trains on Tuesday, Thursday, Saturday and Sunday. In 1946, the was a collapse in Bryn Eglwys. The quarry was called unsafe and people could not use it. It was closed. Haydn Jones kept running the railway and said he would do so until he died. In 1947, most of the railroads in Britain were bought by the government. Talyllyn remained owned by Haydn Jones. Between 1947 and 1949, people could ride the train two days a week. Haydn Jones died on July 2 1950. The railway kept running until October 6.