From the time that the Londonderry and Enniskillen Railway (L&ER) was completed in 1859 there was a number of proposals to connect the line with Sligo. A "Londonderry, Enniskillen and Sligo Railway" was proposed that would have run west from Enniskillen via Manorhamilton direct to Sligo. The Enniskillen and Bundoran Railway (E&BR) was incorporated in 1862, was opened from Bundoran Junction on the L&ER to Bundoran on the Atlantic coast in 1868 and had Parliamentary powers to continue from Bundoran to Sligo, but failed to do so.
The SL&NCR Company was incorporated in 1875, and its construction started at a junction with the Great Northern Railway (GNR) at Enniskillen and proceeded westwards. The E&BR accepted defeat and in 1878 Parliament passed an Act allowing it to abandon its commitment to extend to Sligo from Bundoran. The SL&NCR adopted as its company seal a picture of two steam locomotives colliding, with one derailed and the other remaining on the track. This commemorated the SL&NCR's success in reaching Sligo and the E&BR's failure to do the same.
The SL&NCR opened as far as Belcoo in 1879, Manorhamilton in 1880, Collooney in 1881 and Carrignagat Junction on the Midland Great Western Railway (MGWR) opened in 1882, completing a line of about 43 miles (69 km). Beyond Carrignagat Junction the SL&NCR exercised running powers over the MGWR to and from Sligo.
In 1895 the Waterford, Limerick and Western Railway (WL&WR) was extended to Collooney, forming junctions with the MGWR and SL&NCR. This gave access to a larger area of western Ireland, whose cattle exports formed a significant part of the SL&NCR's traffic.
In 1878 a stationmaster’s house and six houses were built for SL&NCR workers and their families at Belcoo, County Fermanagh. Belcoo station opened in 1879, serving both Belcoo and Blacklion, County Cavan. The last trains through the station ran on 20 September 1957.
The SL&NCR was one of the railways that the Irish Free State's Great Southern Railways did not absorb in 1925 because it crossed the border with Northern Ireland. It became the last privately owned railway undertaking to survive in Ireland (although the Londonderry and Lough Swilly Railway still existed as a road transport firm).
The company never prospered since the countryside it crossed was poor and sparsely populated, although at one time intermittent heavy cattle traffic used the line. Governments on both sides of the border subsidised the railway in its later years, but the SL&NCR closed on 1 October 1957 as a result of the Government of Northern Ireland making the GNR Board close its line through Enniskillen.
SL&NCR locomotives had names, but were not numbered. The company had the use of only two turntables: its own at Enniskillen and the Midland Great Western Railway one at Sligo, and so tank engines were the preferred option.
Its first two main line locomotives were a pair with an 0-6-2T wheel arrangement, Pioneer and Sligo, built by the Avonside Engine Company of Bristol, England and delivered in 1877. These were unsteady riders on the SL&NCR's light track, but the company kept them in service until 1921.
After the disappointment of the Pioneer class, the SL&NCR turned to the 0-6-4T wheel arrangement. In 1879 Beyer, Peacock and Company of Gorton Foundry, Manchester, England had supplied the South Australian Railways K class, which was built to the Irish gauge and designed to run on lightweight track. As a result, the SL&NCR ordered an enlarged version of this design which became the SLNCR Leitrim class. Beyer, Peacock delivered the first two of this class, Fermanagh and Leitrim, in 1882. Proving reliable, the SL&NCR obtained further examples from Beyer, Peacock in 1895, Hazelwood and 1899, Lissadell The SL&NCR started withdrawing the class from service in 1947 and one of the class survived until the closure of the line in 1957.
In 1904 Beyer, Peacock delivered Sir Henry, an enlarged and modernised 0-6-4T design, the SLNCR Sir Henry class. Enniskillen was delivered in 1905 and "Lough Gill" in 1917. All three survived until the closure of the line in 1957.
Further enlargement and modernisation of the design resulted in the SLNCR Lough class. There were only two locomotives of this type, Lough Melvin and Lough Erne, and they were built by Beyer, Peacock in 1949. When the line was closed in 1957 they were sold to the Ulster Transport Authority (UTA), with whom they remained in service until the 1960s. One of them, Lough Erne, is now preserved by the Railway Preservation Society of Ireland at Whitehead, County Antrim.
The SL&NCR was an early adopter of railbuses and railcars, which it introduced in the 1930s and 1940s. One of the latter, Railcar B, was built in 1947 and is now preserved by the Downpatrick and County Down Railway at Downpatrick.