The line was originally planned in the 1850s when Minnesota was still Minnesota Territory, though it took the formation and collapse of a handful of different railroad companies before it was completely built. The first was the Transit Railroad Company, which formed in 1854 and included figures such as Henry Hastings Sibley and Alexander Ramsey who soon went on to become the first and second governors of Minnesota, respectively. However, construction didn't begin until a groundbreaking on June 9, 1858 in Winona. A contract had been awarded the previous day to DeGraff & Co., headed by Colonel Andrew DeGraff. The company was able to grade 50 miles of right-of-way and build bridges along the route, but was hit by the 1858–1859 financial crisis. Work stalled and the property eventually went into foreclosure. The Winona, St. Peter & Missouri River Railroad Company was awarded the property in 1861, but failed to make sufficient progress toward a goal of having trains up and running to Rochester by a deadline set by the state legislature, so ownership transferred to the Winona and St. Peter Railroad Company in 1862. The first passenger train, operated by Col. DeGraff, finally ran on December 9 of that year between Winona and Stockton and back, and the first freight load was carried the next day. This was less than six months after the William Crooks became the first locomotive to run in the state, between Saint Paul and St. Anthony. Many of miles of track were laid in the following years. The railroad reached Rochester in 1864, Kasson in 1865 and Owatonna in 1866. The Chicago and North Western Railway bought the Winona & St. Peter in 1867, though it continued as a distinct subsidiary until 1900. Though the existing property was transferred to the new owner, the underlying land grants that made the line possible were transferred to investors in New York City headed by A. H. Barney, a figure in the early days of Wells Fargo & Company. Today's subdivision was completed in 1868 with the addition of 16 miles through Waseca, though the line continued to be built westward, reaching Dakota Territory in 1872. Additional branch lines were added, including three in 1878: from Eyota south to Chatfield, north from Eyota to Plainview, and north from Rochester to Zumbrota. A fourth branch off the mainline was made farther west the same year, from Sleepy Eye north to Redwood Falls. Interchanges were also made between this line and other north-south rail lines operated by other companies. However, these branches have largely been abandoned today.
Passenger train service continued on the line from its formation until July 23, 1963 when the Rochester 400 made its final run. Amtrak's Empire Builder still briefly runs along a right-of-way shared between the Waseca Sub and Canadian Pacific's main line along the Mississippi River from Tower CK in Winona to Minnesota City Junction. That train uses the former Milwaukee RoadHiawatha route between Saint Paul and Chicago. Chicago and North Western continued to operate the line across southern Minnesota and South Dakota until the 1980s, but was planning to abandon it. The Dakota, Minnesota and Eastern Railroad was formed and took over the line in 1986.
Proposed Powder River extension; sale to Canadian Pacific
Starting in the late 1990s, DM&E began work on an extension from the western end of its line in South Dakota to coal mines in the Powder River Basin, and hoped to run coal trains along this route. The city of Rochester and the Mayo Clinic objected to this and asked the Surface Transportation Board to compel the railroad to construct a lengthy bypass of the city for coal trains and through freights. Rochester and Mayo lost this fight, as the Surface Transportation Board and the courts approved the DM&E's Powder River expansion without requiring a bypass. The Canadian Pacific Railway moved in to acquire the DM&E, which was completed in 2008. The CP dropped plans to extend track to the Powder River Basin.
