The first station in Lancaster was south of Penny Street, and was also the headquarters of the Lancaster & Preston Junction Railway from 1840 to 1849. It was superceded by the present station, then called 'Castle', in 1846. With the appearance of a very handsome Georgian villa, standing at the corner of South Road and Ashton Road, it survives in part as a section of the nearby infirmary. After closure as a passenger station it was used as a goods station. It was known as Lancaster Greaves Station after the locality. It was built as a terminal station which at first sight appears odd since it was already clear that the railway would continue northward. One possible explanation is that at that time it was normal to build a station as near the town centre as possible. Building a through station would be more difficult. Similar to the station at Lancaster was the first solution at York. By contrast Cambridge station, built as a through station, was on the edge of the town. The town centre solution was assisted by the fact that a change of locomotive would have been necessary in any case, so terminating did not cause a significant timing penalty.

The route northward from the first station was initially envisaged on the east side of the town crossing the Lune near the centre.  This was changed by the Lancaster & Carlisle Railway in favour of a cheaper route west of the city following the Lancaster Canal and crossing the River Lune from Ladies Walk to a through station near the castle at its southern end. Castle Station as it became was designed by Sir William Tite, and the original building survives on the west side of the tracks, a Tudor style two storey building with mullioned windows and a Gothic arcaded entrance, all in local stone.

The station was remodelled in 1902 when additional lines and platforms were added and further station buildings constructed. The new buildings were styled mock-Elizabethan with the intention of mirroring the original.

Platforms 5 and 6 were electrified in 1908 to link with the now-closed Midland Railway route from Leeds and Bradford to Morecambe and Heysham. This line had a station called Green Ayre. Around 1900, a small number of other British railway companies were experimenting with electrifying short stretches of their most intensively used lines. The ever-expansionist Midland Railway, with Richard Mountford Deeley as its Locomotive Superintendent, decided to exploit the potential of electrification both in moving holidaymakers as well as ensuring that workers at the then state-of-the-art Heysham port could get to work quickly and easily.

Electrification plans were announced in July 1906 and an intensive service was provided for the next half century. In fact, the Midland's experiment in electric traction was so successful that the three towns were soon linked by one of the fastest suburban rail networks in the world - even outperforming what became the London Underground.

The Heysham and Morecambe lines were electrified on 13 April 1908, extended to Lancaster Green Ayre on 8 June 1908 and to Lancaster Castle on 14 September 1908. The Midland Railway's own generating station at Heysham - already providing power for cranes and other dockside equipment - proved an obvious source of railway electricity, supplying 6 600 volts AC at 25 Hertz through overhead power cables which resembled miniature running rails in section. This system proved very efficient and lasted until 1951. In 1952 a new system was introduced to develop plans for the electrification of the West Coast Main Line.

The line was closed to passengers in 1962 and Green Ayre Station has totally disappeared. A railway hand crane has been placed on the site as a memorial.