The railway company was authorised by Act of Parliament dated 6 August 1897 and opened its single-track line on 29 July 1902. It was operated by the Midland Railway from the start.
Regular passenger services ceased on 22 September 1930, but freight and occasional excursion trains continued until 11 August 1969. The line was then cut back to Swinden Quarry and today it remains a freight-only line used for carrying bulk trainloads of limestone aggregate from the quarry to terminals in Leeds, Redcar, Hull, Birmingham & Wellingborough.
The station at Grassington was built as a through station despite being the line's terminus, as there were plans to extend the line northwards to Hawes where it would meet the Wensleydale Railway. These plans were never realised, however. The name "Yorkshire Dales Railway" survives as the trust that operates the Embsay and Bolton Abbey Steam Railway.