In 1879 an independent company, the Lyndale Railway Co., later renamed the Minneapolis, Lyndale, & Minnetonka Railway Co., began operation of a three foot gauge line from Minneapolis to Lake Calhoun.  It began at First Ave. and Nicollet in downtown Minneapolis, then west along present-day 31st Street across Hennepin Ave., ending on 34th Street on the eastern shore of Lake Calhoun. The total length of the line was 4.5 miles.  Short trains were pulled by two 0-4-2 type steam engines enclosed in streetcar-like wooden bodies.  The company also built a pavilion on the banks of Lake Calhoun near at the terminus of the railroad.

In 1880 the line was extended to Lake Harriet and in July 1882 it was extended further to Excelsior on Lake Minnetonka. In those early days of horse-drawn carriages and dirt roads, the lakes were popular resort and tourist destinations and the railway saw a golden opportunity to make money providing transportation to lake-goers.

The company, however, was never healthy financially, and a decline in lake tourist traffic brought about sale to James J. Hill’s St. Paul, Minneapolis, & Manitoba, a predecessor of the Great Northern Railway, in 1886. The track was widened to standard gauge and extended to Hutchinson, but service from Lake Harriet to Hopkins was discontinued. Further financial pressures related to the unpopularity of steam locomotives on city streets prompted a thirty-year lease to the Minneapolis Street Railway in 1887. Service was further trimmed back to Lake Calhoun and the Lake Harriet- Excelsior trackage was abandoned.