Tacoma Rail began its business in the early part of the century as the Municipal Street Railway, which provided trolley passenger service to the city's industrial tideflats. It became a common carrier in 1914 and, within four years, doubled its lines. In 1918, voters approved creation of the Port of Tacoma, and rail lines were extended to the new shipyard, which was booming.

In the 1920s and 1930s, the railroad carried passengers around town in electric street cars. Soon after, the name was changed to the Tacoma Municipal Belt Line Railway. It then became a utility in the 1950s.

After World War II, Tacoma Rail's bus and passenger operations were transferred to the Tacoma Transit Company, and Tacoma Rail retained only the freight switching operations.

Some Tacoma old-timers still refer to the operation as the "Muni." It became known as Tacoma Rail in 1998 to better communicate its rail freight services.