The 66.9 km long line was opened in stages - the first section from Bad Ischl to Strobl (9.5 km) on 5 August 1890, followed by the line from Salzburg Hbf to St. Lorenz, and the 3.5 km-long branch to Mondsee, on 28 July the following year. The 22.5 km gap between St. Lorenz and Strobl, was not completed and opened until 20 June 1893, and the following year saw the final extension, on 3 July, from Bad Ischl Lokalbahnhof to the south end of the main line station at Bad Ischl. For some time, the line was not a through route, trains having to reverse at St. Lorenz bhf.

Also opened by the SKGLB in 1893, the Schafbergbahn, on the other side of the lake, Mondsee, provided the line with tourists making day excursions from both ends of the line. This traffic ceased with the outbreak of World War 1, and never fully recovered. Economic decline in 1931 led to the sale of the Schafbergbahn and the hotel on the mountain top, together with the cross-lake steamer. However traffic on the SKGLB proper flourished, reaching 1.5 million journeys in 1939. The SKGLB bought three buses to run services in the area, but they were not powerful enough to surmount the gradients on the mountain roads, and following several accidents, services ceased. At the outbreak of the Second World War, the line was taken into public ownership, but was divided between Land Salzburg and Öberösterreich, which led to arguements between the two organisations. Maintenance of track and rolling stock was suspended during the period 1939-1945.

In the year after the end of World War 2 more than 2.1 million journeys were made on the SKGLB, and electrification was proposed. Never started, the railway, with its' 25 km/h limit, soon became unable to compete with the bus services which commenced in 1948. Proposals to unify the line and modernise it were rejected by Land Salzburg in 1950 and 1955.

SKGLB number 4, built by Krauss / Linz in 1891, a "U" class is now in the SKGLB Museum at Mondsee, awaiting return to service on the line which it worked on for the whole of its' life. SKGLB number 5 is also there, a sister to number 4. Built together, number 5 is now owned by Club 760. A third loco, number 7 in the SKGLB fleet, is in the Club 760 museum at Frojach, on the Murtalbahn. This loco, built in 1892, worked (like 4 and 5) until line closure in 1957. It was then sold to StLB, who gave it a new boiler and a larger coal bunker, and used it as S7 on the Feistitztalbahn until 1973. In 1973 the locomotive was moved to Kapfenberg where it was used on the Thörlerbahn until 1975, when boiler wastage caused it to be put aside.It was sold to Club 760, who have had work done on the loco to return it to service.