By 1916, timber in ever-increasing quantities was being exported from Hirschwang via the road to Payerbach and the station. The sawmill owners, Schoeller, applied for permission to build a 5 km long narrow-gauge line to speed up the traffic. The idea was that eventually the line would be regauged to standard, but that it would be cheaper and quicker to build the line as narrow gauge. Built by Russian prisoners of war, the line opened in 1918, using second-hand rolling-stock, rails, and overhead wire, all recovered from the works lines built in connection with the boring of the Karawanken Tunnel. The catenery, in reality a single tram-like overhead wire, was strung from wooden poles, and electrified at 500V dc. The three locomotives were originally built in 1903, and two are still in use today, possibly the oldest working electric locomotives in the world. The works purchased twenty-four flat goods wagons from the Austrian Army. Work commenced on the standard-gauge replacement line, which included a tunnel 428metres long through the Artzberg, but after the monarchy collapsed in 1919, work stopped, and the narrow-gauge line closed as orders for timber dried up. Schoeller ceased trading, but the timber company was bought by Neusiedler AG für Papierfabrikation. This firm intorduced paper making in the area, and laid plans to reopen the railway (still as a narrow gauge electrified line). The original route was altered, replacing the zig-zags either side of the Artzberg with loops up the side valleys, and the overhead was altered and raised. Two new electric railcars and four trailers were bought from Grazer Waggonfabrik and the original accumulator hous at Hirschwang was altered to provide a locomotive and coach workshop and depot. The building is still intact today.Although neither of the original railcars have survived, all four of the trailers are in existence, two of them still working on the line today.

Passenger services started on the line in September 1926, making sixteen return trips a day, connecting with main line services at Payerbach. The journey time was nineteen minutes, the railcars calling at six stations.

In 1927 a cable car was opened to Rax from Hirschwang, and the line was extended over the River Schwarza to the talstation. At the other end, the line was extended in the same year by 125 metres nearer Payerbach station on the Semmering line. The line was now 6.1 km long.

One curiousity left over from 1926 is the ticket sold by the museum railway for travel on the line today. The line had so many printed when it first opened that the stock is still being used, nearly 80 years later. By 1963 the local authorities had declared the line unsuitable for passenger use, although it is alleged that only a 400 metre-long section needed attention. The line closed from 1st July 1963, services being taken over by Post buses. Because of the problem of carrying suitcases and skis on the buses, fewer tourists came to the area, and the cable-car suffered, being closed for periods each day to save costs.

In 1990 the OeGLB took over the running of the former ÖBB narrow-gauge line between Lunz am See and Kienberg-Gaming. Most of the stock was moved to the new line, and the Payerbach - Hirschwang line was more-or-less abandoned by many in the society. By 1992 the line was now longer operating over the Artzberg, the line having deteriorated, and only one electric loco and two coaches were available for traffic. The line looked doomed. However, in 1994, some of the society's younger members undertook to rescue as much as possible of the remains, and such was their success that the local authority, and later the European Union, recognised their business plan, and provided vital funding to repair the line and buildings, making a living museum. The line over the Artzberg was reopened on 25th July 1999, using diesel loco V2 because the overhead wire had been removed in 1990. On 17 June 2000, the line reopened with electric power.

Today the 4.9 km-long line starts at Payerbach Lokalbahnhof, a 5 minute walk from Payerbach ÖBB. The halts at Artzberg, Reischenau, Haaberg, and Hirschwag are still in use (the last a conversion from a house built before the railway), but although the station at Windbrücke Raxbahn and the platform and underpass at Payerbach ÖBB are still in existence, neither are now in use by the railway. Services run during the Summer on Sundays and public holidays, with four return services on operating days, and a fifth service during June, July and August. It is possible to hire your own train for a day.