Regional development in nineteenth-century Australia depended on successful primary production and obtaining economic transport of produce to cities and ports, often initiated through the political activities of ‘railway leagues’. Pastoralists first settled the Cowra region from the 1830s, and established a township that grew rapidly from the 1850s. Cowra subsequently developed as a major wheat-growing district; however, local roads were poor, and the region lacked reliable and economic transport to distant marketplaces. A Cowra railway league therefore formed to argue the benefits that a Blayney-Murrumburrah cross-country railway line would bring to regional and state economies. Promoted by the local member for Carcoar, the line was approved by the Parkes-Robertson coalition government in 1881, and completed in 1887.

Political pressure from other railway leagues also led to construction of ‘pioneer lines’ from Cowra to Grenfell, Canowindra and Eugowra between 1901 and 1922. These lines greatly stimulated regional trade and agriculture by providing local railheads, and the resultant large-scale wheat cultivation transformed the regional landscape. Railways further developed the regional economy with efficient transport for passengers, manufactured products, mail and coal, and were a major employer in the area. The transport of farm machinery by rail also led to increased mechanisation of wheat cultivation. During the Second World War, the railways carried large troop numbers to serve at local military and prisoner camps. Railways remained the principal means of regional transport until local roads improved, and motor vehicles encroached on passenger and freight business from the 1950s.

To support local railway operations, the NSW Government Railways built a small locomotive depot in 1889 near Cowra Railway Station, initially employing around twenty-one men (including enginemen), and maintaining locomotives from other depots. As local traffic demands increased, the depot received a permanent allocation of locomotives, and employee numbers grew. NSWGR then built a much larger depot on the present site south of Cowra Railway Station in stages between 1921 and 1924.

By 1940, twenty-one locomotives were permanently allocated to Cowra Locomotive Depot with around one hundred employees. These numbers remained fairly constant until diesel traction was locally introduced in 1966, eliminating many jobs associated with steam locomotives. The depot received no permanent allocation of diesel locomotives and declined in importance, becoming a sub-depot of Bathurst in 1968. One steam locomotive remained in service at Cowra between 1968 and 1971, after which NSWGR serviced diesel locomotives and other rolling stock at the depot until its official closure in 1985.