A team of were commissioned to survey the route for the KCR British Section in 1905. Two routes have been proposed:
#Construction of a tunnel 1.5 long through then following the west coast of Tolo Harbour
#Routing through Western New Territories and Castle Peak Bay
Although option 2 is less technically challenging, the route is too long and goes through less active areas; therefore option 1 was selected. Works on the to the boarder started early 1906. Construction of the tunnel, referred to as Tunnel No.2 in the plan since it was the second tunnel starting from Kowloon, was the greatest engineering project in Asia of its time.
The tunnel opened with rest of the line in October 1910, together with four smaller tunnels. It accommodated a single standard track with a standard gauge of . It has, however, been notorious for its fume problems throughout its operating life; due to its steep of 1%.
A double tracked, tunnel was built to the immediate west of the original one as part of a modernisation plan starting in 1978, now used by the . The original tunnel was closed upon completion of the new tunnel. It is now occupied by town gas facilities.