The Shipston-on-Stour branch started out as part of the Stratford-upon-Avon to Moreton-in-the-Marsh tramway, which ran southeast from the former to the latter. This horse-drawn line opened in 1826, with ambitions to extend towards Oxford, but apart from a short branch from Longdon Road to Shipston opened in 1836, this was as far as the line progressed; a lack of finance delayed further expansion long enough for the Oxford, Worcester and Wolverhampton Railway to arrive on the scene. The OWW took over running of the tramway in 1847, converting the tramway to standard gauge, although retaining the horse-drawn workings.
With the OWW opening a branch from Honeybourne to Stratford-upon-Avon in 1859, the section from Longdon Road to Stratford was surplus to requirements, and began to decline in use, eventually being taken out of traffic in around 1900 (the line was lifted in World War One). However, concerns about competing railway lines resulted in the Moreton-Shipston section being upgraded to take steam locomotives and this upgraded section was opened in July 1889. There were two intermediate stations on the branch: Stretton-on-Fosse and Longdon Road.
However, the nature of the route being designed for horse-drawn working rather than for locomotive haulage meant that speeds along the branch were little improved from the days of horse-drawn working. The route itself wasn't very direct between Moreton and Shipston, and as far as passenger demand went, there was not a vast amount anyway; the demand was greater for a link to Stratford than it was to Moreton. Passenger services lasted until 1929 (a GWR bus service provided as a replacement was withdrawn after three months); freight would continue to 1960 to Shipston (the two intermediate stations closed during World War Two).