The museum was formed after a group of local transport enthusiasts and collectors in the early 1970s sought to develop a local transport museum. In 1978, the group held a public meeting at which, after an offer was made to lease the former goods yard to the north of the former Alford railway station was made, the Grampian Transport Museum Association was formed. A pilot museum was established in a local factory in 1981, and after the first of the now annual Alford Cavalcade vintage vehicle rally held during July, a combination of local councils offered grants and subsidies to establish a permanent exhibition base. Construction work on the current building was completed in September 1982, and the museum opened in April 1983. An extension was completed in 1998, landscaping and a track added in the early 2000s, and a second building to house larger exhibits in the 2010s.
Major exhibits include the world's oldest Sentinel Steam Waggon from 1914, a giant MackSnowplow and a Jaguar XKR used in the James Bond film, Die Another Day. Exhibits include historic and classic automobiles, motorcycles, a double-decker bus, bicycles, tractors, steam vehicles, an electric tram, toy model vehicles, and transport memorabilia.