The tunnel was originally built by the Northern Construction Company in 1932 connecting the Canadian Pacific Railway railyards on Burrard Inlet and False Creek at a cost of $1.6 million. The tunnel's east portal is located further south than the current portal, easing trains into the False Creek yards on a gentle southward curve. It was clearly visible until about 2005, where it was almost completely hidden next to an outdoor storage area behind the Costco. The portal was destroyed in 2011 to make way for a new development. There is now an abandoned portion of tunnel unused by SkyTrain at the former east portal.
The tunnel was taken over by BC Transit in the early 1980s when the SkyTrain system was built in conjunction with Expo 86. Because the tunnel is only wide enough to accommodate a single railway track but with sufficiently high clearance, a superstructure was built inside the tunnel to carry the westbound SkyTrain track above the eastbound track. This results in the two stations within the tunnel having a split platform configuration.