In 1870 Nikolaus Riggenbach the designer of Europe”s first cogwheel railway visited Budapest. His concept was to connect Sváb Hill, a district developing into a holiday resort in the 1850s, to the rest of the capital city of Hungary. The representative of the Basel-based company, the Internationale Gesellschaft für Bergbahnen applied for permission to construct a cogwheel railway to Sváb Hill in 1873. The agreement on this project was signed on 7th April 1873. The cogwheel railway departed for the first time in its history as the third such vehicle in Europe at 4 p.m. on 24th June 1874.

The whole line was built according to Riggenbach’s cogwheel system.  The normal-gauge single track railway was 2883 m (1.56 miles) long all the way uphill with a difference in height of 264 m.  Seeing the successful operation of this railway, the line was extended up to Széchenyi Hill in 1890, increasing the length of the line to 3700 m. From 2nd July  1929  the new electrically powered vehicles ran every 15 minutes. 1973 saw a full reconstruction, and new vehicles introduced. The older trains last ran on 15th  March 1973 and traffic using the new vehicles began on 20th August of the same year.