A ferry has operated from Hythe to Southampton since the Middle Ages. It is first recorded on Saxton's map of 1575. Steam vessels were first introduced in 1836. The current ferry service is operated by two vessels. The first is  'Great Expectations', which is a catamaran ferry used originally on the service across the River Thames from Tilbury to Gravesend. The other is 'Hotspur IV', built in 1946 and used on the Hythe Ferry ever since. She was the last in a line of similar ferries. One of her earlier half-sisters, the Hotspur II of 1936, is still in service as a ferry on the Firth of Clyde under the name Kenilworth.

Hythe Pier stretches 640 m (700 yds) from the centre of Hythe to the deep water channel of Southampton Water. It is approximately 4.9 m (16 ft) wide, and carries a pedestrian walkway and cycleway on its northern side, and the track of the Hythe Pier Railway on its southern side.

Construction of the current pier started in 1879 and it was opened in 1881. Probably at the time of the building of the pier, a narrow gauge railway was constructed for use with the transport of goods. The vehicles on this original railway were hand-propelled.

In 1922 the railway was reconstructed and electrified, attaining its current form. The track is laid to 610 mm (2 ft) gauge, and is electrified at 250 V DC by means of a third rail on the seaward side of the track. The line consists of a single track with no passing loops, although there are two non-electrified sidings at the landward end.

The line is operated by two four wheel electric locomotives built by Brush during World War I (works numbers 16302 & 16307, These locomotives were built in 1917. As built these locomotives were battery powered, and were used at the wartime mustard gas factory at Avonmouth. The locomotives were transferred to Hythe after the war, where they were converted to collect power from a third rail and had their batteries removed. The two locomotives are currently crudely numbered No1 & No2 on their seaward sides.

The line owns four bogie passenger cars, two of which are equipped with a driving cab at their seaward ends. In normal operation, the single train in service is made up of one of the locomotives propelling three passenger cars and a four wheel flat car for baggage. The locomotive is always located at the landward end, whilst the seaward passenger car must be one of those with a driving cab. The line also possesses a four wheel oil tank car, which is used to carry fuel to the Hythe ferries.