The first railway lines in Victoria were built in the 1850s, and were privately owned and operated. These started having financial problems and were taken over by the Government Railway Department (Victorian Railways), which was established by the Colonial Government and became a vertically integrated government service. This structure remained until corporatisation began in the 1970s, followed by privatisation in the 1990s. Passenger services today are operated by Metro Trains Melbourne in suburban Melbourne with electric multiple units, and V/Line in regional Victoria with diesel trains. Freight services are operated by Aurizon (interstate), Pacific National and SCT Logistics (interstate and intrastate), and Qube Logistics and TransVolution (intrastate).
The rail network radiates from the state capital, Melbourne, with main interstate links to Sydney and to Adelaide, as well as major lines running to regional centres, upgraded as part of the Regional Fast Rail project. The rail network reached a peak in 1942 but steadily declined, as branch and cross country lines were closed until the 1980s.
Victoria does not have a dominant mining base as with other states, and has traditionally been more dependent on agriculture for rail freight traffic. By the 1990s road transport had captured most general freight traffic, with an average of only 6.1 million tonnes of intrastate freight carried each year between 1996 and 1998; containers being the major cargo, followed by cement, logs, quarry products and steel.
Australia's first steam operated railway was a 2 1⁄2 mi (4.0 km) Victorian broad gauge line between the Melbourne (or City) Terminus (on the site of modern-day Flinders Street station) and Sandridge (now Port Melbourne), constructed by the Melbourne and Hobson's Bay Railway Company and opened in September 1854. The first country line in Victoria was from Melbourne to Geelong, opened in 1857 by the Geelong and Melbourne Railway Company. The early years saw the lines being constructed by private companies.
The suburban network expanded to the east from Princes Bridge to Richmond in 1859, then later to Brighton and Hawthorn by the early 1860s. the initial suburban lines were all built by different private companies centred upon Flinders Street, being amalgamated into the Melbourne and Hobson's Bay United Railway Company by 1865, with public ownership not coming until 1878. In 1862 Victorian Railways lines had reached the great gold rush towns of Bendigo and Ballarat, and in 1864 railways were extended to the Murray River port of Echuca. In the 1870s the Government Railway Department (Victorian Railways) started to build its own lines.