The line was built as a 760 mm gauge steam railways by the firm Stern und Hafferl, and opened on 10 October 1898, travelling north from the junction with the main line at Althofen, then westward up the Gurk Valley for 268.85 km to the terminus at Klein Glödnitz. Although the area has few villages and no towns except at the junction, it was moderately successful in the period up to the beginning of the First World War.

In 1902 and Italian, Baron Treves, established a forest railway, lightly laid, from Hst. Gunzerdorf (8.29 km) northwards for 4 km into the Hölleiner Forest, to assist the removal of cut timber. A mill and timber yard was established at Dobersberg, and goods were transported in standard gauge wagons on röllbocke via the Gurkthalbahn to the main line at Althofen. At first using a steam locomotive, an Austro-Daimler diesel was introduced in 1930, after which the forestry area was purchased by Wilhelm Gorton. The line went out of use in the 1950's and was removed, the trucks and track being sold for scrap. The route was turned into a roadway into the forest, and no trace remains today.

The Gurkthalbahn was nationalised from 1 January 1932, but by the mid-1950's the line was losing money heavily, mainly because the sparsely populated area could not provide enough traffic. Passenger services ceased on the whole line from 26 November 1968, and although fright continued along the first 12.67 km of line to Straßburg, this too succumbed from 14 February 1972.

A group of "Friends of the Gurkthalbahn" had been formed when the line closed to passengers, and in April 1969 was formally turned into the "Verein der Kärntner Eisenbahnfreunde", with the intention of retaining part of the line as a living museum. The line was removed by ÖBB from the terminus at Klein Glödnitz back to the level crossing at Pöckstein-Zweischenwässern, a distance of 3.26 km. The rest of the line was handed over and reopened on 1 June 1974, the first preserved railway line in Austria. Today the line runs on Sundays in the Summer months, and on certain Saturdays and Bank Holidays. The museum has a collection of steam and internal-combustion engines, together with a large selection of passenger and freight rolling stock from a number of narrow gauge lines throughout Austria.