The first electric toy trains were manufactured by the Carlisle and Finch Company in 1893. They ran on metal strips and were powered by two wet-cell batteries. Joshua Lionel Cowen's first train, the Electric Express, ran on four dry-cell batteries. By 1906, Cowen had developed a transformer that connected the tracks to wall outlets and reduced the outlet's 110 volts to 20, eliminating the need for batteries. Originally, one track carried the positive charge, and the other the negative. Another of Cowen's innovations was the three-track system in which the center track was positive and the two outside ones were negative. This system was less susceptible to short circuits. The tracks of Cowen's earliest trains had a gauge of 2 7/8 inches, but for many years the less expensive Lionel trains used a 1 1/4-inch gauge, called the "O" gauge, and the more expensive ones a 2 1/8-inch gauge, called the "standard" gauge.

Lionel's leading standard-gauge train for many years was the Pullman Deluxe. The base system was a No. 42 engine and three passenger cars. Introduced in 1912, it originally cost $62.50. For another $12.50, the buyer could substitute engine No. 54, which was finished in brass and nickel. In 1921, a second motor was added to the No. 42 so that it could pull more cars. By 1929, the Transcontinental Limited stretched nine feet and cost $110, more than a used car in good condition. However, freight trains were more popular overall, because the purchaser could add milk, cattle, crane, flat, oil, and other cars, and each one came with a caboose. Finally, Lionel sold accessories, such as bridges, tunnels, street lamps, conveyors, culverts, newsstands, crossing gates, houses, water towers, oil derricks, gantry cranes, barrel loaders, ice depots, freight sheds, floodlight towers, signal towers, train depots, fueling stations, artificial grass, artificial coal, coal elevators, forklifts, sawmills, and miniature people.

For the largest layouts, the No. 840 Power Station was available. Besides looking like a power station, it contained two transformers and six electrical switches. Among Lionel's later innovations were a "chugger" sound effect in 1933, a whistle in 1935, automatic couplers in 1945, smoking trains in 1946, and magnetic traction in 1950.

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