The brand name is believed to have appeared sometime around 1907, and it was identifying itself as the American Flyer Manufacturing Company and issuing catalogs by 1910. Early trains used clockwork motors, and electric American Flyers did not appear until 1918 or 1919.
In 1925, American Flyer began offering Wide Gauge electric trains at a premium price, attempting to compete with Lionel. Like most of its competition, American Flyer did well in the 1920s but suffered in the Great Depression. Focus shifted to more economical O gauge trains, but the company's fortunes continued to struggle. In 1938, the company sold out to the A. C. Gilbert Company, the makers of Erector construction toys.
Gilbert redesigned the American Flyer product line, and after World War II, it discontinued the O gauge trains in favor of the slightly smaller and more realistic 1:64 scale S gauge. Flyer played up its improved realism, with two-rail track and and realistic couplers, with Gilbert himself saying the design was inspired by his son's dissatisfaction with other toy trains available on the market. "Kids want realism," he said.
The trains proved popular, but American Flyer was always the #2 brand to Lionel. While Louis Marx and Company may have sold more trains than American Flyer, it was considered a budget brand, while Lionel and American Flyer shared premium status.
Like Lionel, Gilbert's fortunes waned in the 1960s as the popularity of American Flyer trains and Erector sets declined. Gilbert discontinued the American Flyer line in 1966 and declared bankruptcy in 1967. Lionel purchased the name and dies the same year, but did nothing with them until 1979, when its successor company started to reissue Flyer products under that name in 1979. The brand name survives today, although Lionel's emphasis remains on its O and O27 gauge product lines.