The Wensleydale Railway Association (WRA) was formed in 1990 with the main aim of restoring passenger services. When British Rail decided to try to sell the line between Northallerton and Redmire following cessation of the quarry trains to Redmire, the WRA decided to take a more proactive role and aimed to operate passenger services itself. The Ministry of Defence (MoD) had an interest in using the line between Northallerton and Redmire to transport armoured vehicles to/from Catterick Garrison. The MoD paid for repairs and restoration of the line and the installation of loading facilities at Redmire, and did not object to WRC taking over the line. A trial train ran in November 1993 and full MoD operations started in July 1996. These military transport trains continue to this day.

In 2000 WRA formed a separate operating company, the Wensleydale Railway plc (WRC), and issued a share offer to raise funds. £1.2 million was raised through this method. Railtrack agreed to lease the line between Northallerton and Redmire to WRC and a 99-year lease was signed in 2003. Passenger services restarted on 4 July 2003 with the stations at Leeming Bar and Leyburn being reopened. In 2004, the stations at Bedale, Finghall and Redmire were reopened. In 2010 a passing loop was opened at the site of the former Constable Burton station, which enabled the railway to introduce a 2-train service when required.

In 2014, Scruton station was reopened and a new station built at Northallerton West, enabling passenger services to be extended east of Leeming Bar, but this section was closed to passengers again in August 2016 following a collision between a train and a car at a level crossing near Yafforth. It is hoped to recommence services at a future date once work to upgrade level crossing equipment is complete.

In 2016 it was reported that the railway carries over 50,000 people a year and that for every £1 spent on the railway, £4 is spent at one of the towns or villages on the route.