Palmer Lake traces its name and beginnings to General William J. Palmer and his Denver and Rio Grande Western Railroad. The Railroad opened for passenger and freight business on January 1, 1872. The Palmer Lake Depot and Judd's Eating House were built on the west side of the lake in 1882.

The Atchison, Topeka and Santa Fe Railroad laid tracks and opened their station on the east side of the lake in 1887. During WWI when the U.S. government took over management of the railroads, the two lines were consolidated. Northbound trains were sent over the Santa Fe tracks and southbound trains used the Rio Grande tracks.

As automobiles became the principal means of travel, the use of passenger trains dwindled and both stations were torn down about 1940.

A small station was moved to Palmer Lake from Pring in 1936 and run by Henry Rasmussen. It was closed in 1967 and moved to South Park.

The last regularly scheduled steam locomotive came through Palmer Lake in 1962 and it belonged to the Colorado Southern Railroad.

The Town of Palmer Lake purchased the lake, reservoirs and water rights form the D&RG Railroad in 1982.