The origins of the WHRL lie in a small group of railway enthusiasts, including some disgruntled volunteers from the Festiniog Railway, forming the Welsh Highland Railway Society in 1961, to preserve and rebuild the original WHR which had operated from 1922 to 1936. Construction of the line started in the 1970s following the acquisition of land from British Railways running alongside the Cambrian Coast line at a location known as Beddgelert Sidings. A substantial works and engineering facility has been constructed on the site of the former farm that was situated in the triangle of land between the Beddgelert Siding and the Cambrian Coast Railway. The works have been expanded with newly constructed shed accommodation in addition to the utilisation of some of the original farm buildings, which include one of the oldest buildings in Porthmadog. There has been, for some time, a museum part to the works tour and from 2009, with construction of a new building, this will be more than doubled in size and its nature.
The railway is now nearly entirely run by volunteers. There is a group for the young volunteers, known by 'The Young Highlanders'. The group was formed in 1996 by Mark Herbert, (publicity manager), Tim Heeks (volunteer) and the late Gordon Roe (volunteer).
In 2014, 'Russell' returned to service after an expensive major overhaul. The cost was about £250,000. Russell had been out of service since 2003.
The railway currently operates a frequent service from March to November from their main station, which is located opposite the Network Rail station in Porthmadog on Tremadog Road. Trains run for 1-mile (1.6 km) to Pen-y-Mount Junction, where the railway connects with the WHR mainline On the return journey, the train stops at Gelert's Farm halt, allowing passengers to visit a museum and a 71⁄4 in (184 mm) gauge miniature railway.
For 2007 and 2008, an additional short section of line was in use between Pen-y-Mount Junction and Traeth Mawr Loop. This line was built as part of an agreement signed in 1998 with the Ffestiniog Railway and allowed WHR Ltd. to run on the original Welsh Highland Railway trackbed for the first time. As part of the agreement, the section closed and became a construction site when the Ffestiniog Railway constructed WHR mainline from Caernarvon was connected in 2008.