Prior to the building of the tunnel, communications between the Bristol area and South Wales were primarily by boat. With the coming of the railway, services were forced to either take a long detour via Gloucester, or to transfer their passengers and cargo onto a ferry. The GWR proposed to drive a tunnel under "The Shoots", a relatively narrow but unusually deep section of the estuary. This meant steep gradients by railway standards in order to reach the required depth.
Work on the tunnel began in March 1873, and proceded gradually through the 1870s. The builders' real difficulties began in October 1879, when the workings were inundated on the Welsh side by fresh water from what would come to be known as the "Great Spring". Holding the Great Spring in check required the installation of greatly increased pumping facilities, and a diver had to be sent down a shaft and 300m along the tunnel heading to close a door in the workings and seal off the waters. Work in the area of the Great Spring was unable to continue until January 1881. Work was later disrupted by further flooding from the Great Spring, a large tidal wave and a breakthrough of the bed of a pool on the English side.
The tunnel was completed during 1885 and a goods train passed through it on January 9, 1886, but regular services had to wait until the pumping systems were complete. The tunnel opened to goods trains in September and to passenger traffic in December 1886, nealy 14 years after work had started. Fixed steam engines pumped out the Great Spring and other sources of water until the 1960s, when they were replaced by electrically powered pumps.
The Second Severn Crossing, which passes above the tunnel, crosses over it on a "ground level bridge" on the Welsh side supported in such a way that no load is imposed on the tunnel.