After the First World War there were several attempts to introduce a model railway about half the size of 0 scale that would be more suitable for smaller home layouts and cheaper to manufacture. H0 was created to meet these aims. For this new scale, a track width of 16.5 mm was designed to represent prototypical standard gauge track, and a model scale of 1:87 was chosen. By as early as 1922 the firm Bing in Nuremburg,  Germany, had been marketing a “tabletop railway” for several years. This came on a raised, quasi-ballasted  track with a gauge of 16.5 mm, which was described at that time either as 00 or H0. The trains initially had a clockwork drive, but from 1924 were driven electrically. Accessory manufacturers, such as Kibri, marketed buildings in the corresponding scale.

At the 1935 Leipzig Spring Fair, an electric tabletop railway, Trix Express, was displayed to a gauge described as Half Nought Gauge, which was then abbreviated as Gauge 00 (“nought-nought”). Märklin, another German firm, followed suit with its 00 gauge railway for the 1935 Leipzig Autumn Fair. The Märklin 00 gauge track that appeared more than ten years after Bing’s tabletop railway had a very similar appearance to the previous Bing track. On the Märklin version, however, the rails were fixed to the tin ‘ballast’ as in the prototype, whilst the Bing tracks were simply stamped into the ballast, so that track and ballast were made of single sheet of metal.

HO scale trains elsewhere were developed in response to the economic pressures of the Great Depression. The trains first appeared in the United Kingdom, originally as an alternative to 00 gauge, but could not make commercial headway against the established 00 gauge. However, it became very popular in the United States, where it took off in the late 1950s after interest in model railroads as toys began to decline and more emphasis began to be placed on realism in response to hobbyist demand. While HO scale is by nature more delicate than 0 scale, its smaller size allows modelers to fit more details and more scale miles into a comparable area.

In the 1950s HO began to challenge the market dominance of 0 gauge and, in the 1960s, as it began to overtake 0 scale in popularity, even the stalwarts of other sizes, including Gilbert (makers of AmericanFlyer) and Lionel Corp. began manufacturing HO trains.

Currently, HO is the most popular model railroad scale in both continental Europe and North America, whereas OO gauge (4 mm:foot or 1:76.2 with 16.5 mm track) is still dominant in Britain.

There are some modellers in Great Britain who use HO gauge. For them, the British 1:87 Scale Society was formed in 1994; it publishes a quarterly journal with news, views, and practical advice for modellers and collectors. A magazine, Continental Modeller, majors on the railways of other countries, including America and Europe, and has extensive coverage of HO gauge layouts.