The railway has origins in the network of narrow gauge railways which served Lincolnshire's vast potato growing industry before the development of modern roads. The largest was the Nocton Estates Light Railway, operating seven miles south of Lincoln. Its track and rolling stock came from the trench railways built by the British military (RE Light Railways companies) in the First World War to take troops and munitions to the front lines. When the Nocton system was made obsolete by more efficient tractors, motor vehicles and improved roads, the rolling stock and other equipment was preserved and adapted for passenger use.

The Lincolnshire Coast Light Railway is a 60 cm (1' 11 5/8") gauge line which hosts a unique and historically important collection of early English narrow gauge railway carriages and wagons, diesel locomotives and one steam locomotive. It is the only true narrow gauge railway on the East Coast of the British Isles. Even the rails are of historic interest, reclaimed from industrial and quarrying sites, where narrow gauge railways had once provided essential transport. The railway also hosts an important collection of WW1 trench railway vehicles which have been restored by the LCLR Historic Vehicles Trust.

One unique item is the passenger carriage from the Nocton Estates Light Railway, built on the frame of one of the War Department Light Railway's Class 'D' bogie wagons. It had been used for inspections of the estates and to transport shooting parties; after closure of the Nocton system, it was used as an office. In addition, a WDLR Class 'P' four-wheeled ration wagon, once used by the LCLR as an open top passenger vehicle, has also been modified for use on the railway.

The Railway's five diesel locomotives are all Simplexes - locomotive 'Paul', built by Motor Rail of Bedford in 1926 (works number 3995) was a veteran of the Nocton railway. The others are locomotive 'Wilton' (works number 7481, built 1940), locomotive 'Nocton' (works number 1935, built 1920), locomotive 'Major' (works number 8622, built 1944) and an un-named example (works number 8874, also from 1944). An 0-6-0 saddle tank steam locomotive, built in 1903 by Peckett & Sons (works number 1008) for lime works at Southam in Warwickshire, is currently under restoration.

The importance of the four vehicles owned by the LCLR Historic Vehicles Trust has been recognised by the Science Museum and the Transport Trust who have contributed to the cost of their restoration. For many years they were displayed in the Museum of Army Transport. They include the only surviving ambulance van built for the WW1 trench railways, two Class D bogie wagons and a Class P four-wheeled ration wagon.

The railway is now based at Skegness Water Leisure Park, three miles north of Skegness. The line re-opened in May 2009 after twelve years of reconstruction by a small group of volunteers. The heritage railway originally operated at Humberston between 1960 to 1985 where it transported holidaymakers from a bus terminus.