The concession for the construction of a rail link between Rheineck and Walzenhausen was granted in 1889. The
Drahtseilbahn-Gesellschaft Rheineck-Walzenhausen company started construction in 1895 and the line opened on 27 June 1896. As constructed, the line was a water operated
funicular railway that linked the current upper station at Walzenhausen with a lower station at Ruderbach, some short of Rheineck station. In 1909, a connecting
tram line was opened, initially operated by a
gasoline-powered tram and later electrified. The owning company would subsequently change its name to
Bergbahn Rheineck-Walzenhausen AG. By the 1950s the funicular was showing from its age, and it was finally closed on 1 May 1958 as the result of a broken axle. That year work commenced on the conversion of the funicular to a
rack railway, using the
Riggenbach rack system but retaining the funicular track gauge of . The connecting tramway was
regauged and connected to the new rack railway, although retaining its adhesion operation, and the resulting line was electrified at 600
V DC. To operate the new line, a single four-wheeled railcar, BDeh 1/2 1, was built in 1958. In 2006 the
Bergbahn Rheineck-Walzenhausen AG company was merged into the
Appenzell Railways. The 1958-built car remains the only rolling stock on the line, and in 2014 was given a full overhaul, returning to work in May of that year. During the overhaul period, the line was replaced by a bus service. == Operation ==