Joshua Lionel Cowen was already a successful inventor when he created his first toy train in New York City in 1900. His first commercial toy train was the 'Electric Express.' By 1910, electric trains had become a big business. At the end of World War I, Lionel was one of three major U.S. manufacturers of toy trains and accessories. The Great Depression of the 1930s badly hurt the company. They avoided bankruptcy with a wind-up handcar featuring Mickey and Minnie Mouse that operated on O gauge track and sold for $1.00. In 1939, Lionel discontinued its standard gauge products, concentrating on the more affordable O gauge and OO gauge which it had introduced in 1938. During World War II, the company converted to making nautical items for the U.S. Navy.

Lionel resumed production of toy trains in 1945. During the 1950s, Lionel outsold its closest competitor, American Flyer, nearly 2:1, peaking in 1953. In 1959, Cowen and his son sold their interest in the Lionel company and retired.

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