The railroad originally was to run south from Wadsworth, Nevada to a salt marsh where this commodity (salt) important to ore refining was to be found. This line was to be called the Western Nevada Railroad. The gentleman organizing this enterprise was John T. Davis from San Francisco. He wanted to get financial support from the locals because D.O. Mills and the Virginia & Truckee had the same idea in mind. But before this opposition could be met, the backers decided that it would be better to go north to Oregon. In June 1880, a meeting was held in Reno to organize a new railroad. Just exactly where this railroad would be built was still up for debate. The country north of Reno was dotted with cattle ranches and farms. These folks had had a long journey to market and a railroad would meet their needs nicely. Driving cattle to Reno would be a thing of the past. It is reported that even turkeys were among the livestock treading the road south. It was decided that the best plan would be to build unopposed in the northerly direction. The now north bound railroad's destination was to be The Dalles, on the Columbia River. The Northwest had, at that time, no rail connections East or South.

Work started in November 1880, and the direction of the construction was indeed, to the North. A survey to the South had been made, but this would have paralleled the Virginia & Truckee. No doubt, the wide gauge road would have objected strenuously to competition of this sort and the option could not have been seriously considered. The grading proceeded until February 1881, when the first of many financial snags tripped up the fledgling railroad. A Col. Moore, who Davis had met in New York while trying to finance the southbound scheme, had taken the job of constucting the railroad and had absented himself to the East when the first payments were due to the contractors. Construction restarted quickly, but time and again, this type of scenario played out in the progress of the railroad.

The first locomotive purchased was the "Santa Cruz", a little Porter 0-6-0 from the Santa Cruz and Felton Railway in California. This locomotive was to be in repair almost as much as it was in service, while doing the chores on the "Nevada & Oregon Railroad". Meanwhile, the bondholders, stockholders and anyone else financially tied to the railroad went at each other tooth and nail for the remainder of the decade. Suits, countersuits, sheriff's auctions, all played a part in the early history of this railroad. This was the beginning of the N-C-O.

In 1884, as the Nevada & Oregon Railroad, two new locomotives were ordered from Baldwin Locomotive Works and delivery was made in 1885. These were 4-4-0 "American" type as used all over the narrow gauge West. They both had 44" drivers. These two were joined by a third loco of the same specifications in 1887. The first of the larger locomotives, No.4, a 2-8-0 Consolidation from Baldwin arrived in 1888. By this time the railroad was known as the Nevada & California Railroad. November 1890 was the date that the railroad reached a location named Amadee, 80 miles from Reno. This was only a water stop and hotel, but it remained the northern terminus for the next ten years while the owners regained some financial stability.

When the railroad began building again, the goals seemed to be water, not business. The line bypassed Susanville, ignoring the potential lumber business there. About this time, the N-C-O purchased the Sierra Valleys Railway which ran from Plumas Junction (M..P.35) westward to Mohawk in the Sierra. The N-C-O rails reached north to Madeline, 144 miles from Reno in April, 1902. Madeline became a large shipping point for livestock and the area was promoted as an agricultural paradise. It was claimed that the soil was ideal for growing oranges.

June, 1906 saw construction continuing north to Likely. Between Madeline and Likely was Likely Hill, a problem area because of snow each winter. 1908 saw Alturas in Modoc County as the northern terminus. A town of streets and businesses had finally been reached. All the previous stations and stops had been hamlets, stock or agricultural loading sites. Even though the railroad traversed mostly open land with few inhabitants, this period was marked by profits and dividends which were distributed to stockholders.

The Articles of Incorporation were amended in 1910 to specifically state that the goal of the railroad was the Dalles in Oregon. Before crossing the California-Oregon state line, the railroad stopped temporarily at Davis Creek on the lower end of Goose Lake. For a while, the passengers were transported the remainder of the distance to Lakeview, Oregon by boat. In January, 1912 the town of Lakeview was reached by the rails of the N-C-O. Lakeview would prove to be the most northerly projection of the railroad, although this was not realized at the time. Impressive brick depots had been constructed at Reno and Lakeview with a smaller example at Alturas.