With the growth of the city, and the construction of the "scientifically designed" New Town to the north, the Nor Loch between the Castle and New Town became a fetid open sewer, something at odds with the city's modern Scottish Enlightenment aspirations. Works were undertaken to drain the loch and properly direct the city's sewerage, and by 1820 the loch was largely dry and the land was available for development. Much was used to build Princes Street Gardens, an extensive landscaped park.

With the explosion of railway travel in Britain underway, and in spite of much protest, three railway companies each built stations near one another in the valley, opening over the course of the 1840s. The collective name "Waverley" - after the Waverley novels by Sir Walter Scott - was used for the three from around 1854. The three stations were North Bridge Station, opened in 1846 by the North British Railway; General Station, also opened in 1846 by the Edinburgh and Glasgow Railway; and Canal Street station, opened in 1847 by the Edinburgh, Leith and Newhaven Railway.

The latter served Leith and Granton via a long rope-hauled tunnel under the New Town. This station was set at right-angles to the other two. In 1868 the North British Railway company acquired the stations of its rivals, demolished all three, and closed the Scotland Street tunnel to Canal Street. The present Victorian station was built on the site and extended in the late 19th century. The North British Hotel (now The Balmoral) opened in 1902 as a railway hotel, and was operated as part of the station until the 1980s. Waverley has been in continual use since, under the auspices of the North British, later LNER, British Rail, Railtrack and latterly Network Rail.

From its opening, Waverley has been the principal railway station in Edinburgh. Formerly the city had a second major station, Princes Street, operated by the rival Caledonian Railway, but this was never as important as Waverley, and it was closed in 1965.