A railway was proposed between Bristol and Exeter, a distance of 85½ miles (137 kms), shortly after the Great Western Railway (GWR) was formed. The Bristol & Exeter Railway (BER) acquired its Act of Parliament on 19 May 1836, but almost immediately ran into financial difficulties when many shareholders failed to pay calls on their shares. Construction eventually began in 1838 and the first section of the line between Bristol and Bridgwater opened in May 1841. The line finally reached Exeter on 1 May 1844. To reduce the cost of building and operating locomotives and rolling stock, the company leased its line to the GWR, which operated the Bristol and Exeter traffic until 30 April 1849.
While the original Act included four branch lines, only the 1½ mile Weston-super-Mare branch was built. This short branch line was operated by horse power until 1851.
In 1844 a local company obtained an Act to build a 5¾ mile line between Exeter and the ancient town of Crediton. This line was opened in 1851 with broad gauge track and operated by the BER. However, two rival proposals to extend the line northwards from Crediton to Barnstaple (32 miles) eventually saw the Exeter and Crediton Railway and the Tawe Vale Extension Railway (later changing its name to the North Devon Railway) becoming owned by the London and South Western Railway - a standard gauge railway and bitter rivals of the GWR. The line to Barnstaple eventually had both broad and standard gauge ("mixed gauge") track.
The GWR had made a generous offer to purchase the BER in 1845, but this was declined by the BER shareholders. The BER then proceeded to obtain Acts to build branches to Clevedon (opened July 1847), Tiverton (opened June 1848) and Yeovil (eventually opened October 1853 after construction was halted for a number of years). Other branches were proposed between 1846 and 1848, but all were abandoned when the demand for railway shares collapsed in 1847 and obtaining finance became very difficult.
In 1851 the BER entered into a 7 year lease agreement to operate the 12½ mile line built by the Somerset Central Railway between Highbridge (on the BER main line) and Glastonbury. This was a broad gauge line, which, during the lease period, was extended at the western end between Highbridge and Burnham (1½ miles - one of the original branches authorised in the BER 1836 Act), and at the eastern end between Glastonbury and Wells (5¼ miles). However, by the expiry of the lease in 1858, the Somerset Central Railway had made an alliance with the Dorset Central Railway (later merging with it to become the Somerset & Dorset Railway), which was jointly owned by the Midland Railway and London & South Western Railway. The line therefore fell into the ownership of standard gauge railways and the gauge was altered in August 1861.
On expiry of the lease to the GWR, the BER began operating its own trains on 1 May 1849. Initially the BER owned 20 passenger and 8 goods locomotives, plus a steam railcar which operated the Tiverton branch. The passenger locomotives were designed by Daniel Gooch for the BER, and were a smaller version of Gooch's 4-2-2 "Iron Duke" class, with 7ft 6in (2.3m) driving wheels. Similarly, the goods locomotives were identical to contemporary GWR 0-6-0 locomotives. A further 4 goods locomotives were delivered in 1853. The steam railcar had a short life - the engine being detached from the coach in 1851 and it is recorded as being "out of service" by 1854.
James Pearson (formerly of the South Devon Railway) was appointed Locomotive Superintendent in 1850. Prior to the opening of the BER's Bristol locomotive works in 1859, Pearson ordered five 2-2-2T well tank engines for branch line work, eight 4-2-4T well and back tank engines for express passenger trains, four 0-6-0 goods tender engines and six 4-4-0T saddle tank engines for both goods and passenger work. Of these 52 engines, 12 of the original 4-2-2 passenger engines, three of the 2-2-2T well tank engines, the eight 4-2-4T tank engines and the railcar were scrapped or sold prior to the BER's amalgamation with the GWR in 1876.
Coaches and wagons were built and maintained at the company's works in Bridgwater which operated independently of the locomotive works until 1870.