It was originally begun as a coal mine in 1825 by Jacob Beltzhoover. The mine was extended to the south side of Mount Washington by 1861, and used as part of a system to transport coal from mines along the Saw Mill Run valley to Pittsburgh, connecting with the 850 feet (260 m) Mt. Washington Coal Incline. The lease to the tunnel was purchased by the Pittsburgh and Castle Shannon Railroad from Mrs Mary Anne Bailey in November 1871, with the height of the tunnel being increased from 5.5 feet (1.7 m) to 12.5 feet (3.8 m) in 1874. The tunnel provided passenger service beginning in 1874, but this was terminated in 1880, and its passenger duties assumed by the Castle Shannon Incline. The tunnel was declared unsafe for passenger transport in 1893. However, the tunnel and the Horseshoe Curve continued to be used to transport coal until May 1, 1912.
The southern (Beltzhoover) end of the tunnel temporarily collapsed in a rainstorm in 1901.