The TVRR originated as the Tanana Mines Railway in 1905 and was renamed the Tanana Valley Railroad in 1907. The company declared bankruptcy and was liquidated c. 1917. The U.S. government purchased the railroad in June 1917, and the section between Fairbanks and Happy was converted to dual gauge by the Alaskan Engineering Commission Railroad, in order to complete a 4 ft 81⁄2 in (1,435 mm) standard gauge railroad line from Seward to Fairbanks. This line became the Alaska Railroad in 1923. The Alaska RR continued to operate the former TVRR narrow-gauge line as the Chatanika Branch, until decommissioning it in 1930.
In 1922, the railroad's Engine No. 1, the first steam locomotive in Fairbanks and the Yukon, was retired. Its restoration was begun in 1997 and completed in 2000. As of 2011 it is still being steamed up several times a year. A small museum for the engine was built in 2005 in Pioneer Park.