Government cuts dictate that Barming's village station must close, and its steam engine, Matilda, be scrapped. Four youngsters whose lives revolve around the railway - signalman's grandson Charlie, Station Master's children Carole and John Waterhouse, and their friend Arthur - hope landowner Lord Chalk can run the line as a private concern and save Matilda.

A man from the ministry comes to collect Matilda, but the youngsters have carried out a little sabotage - the engine explodes and goes out of control, leaving him dazed and blackened. Having bought time, the children set about repairing their damage.

The kids hold a fund-raising dance for local children at the station, where two suspicious characters claiming to be train enthusiasts approach them. Mr Jones and Mr Galore buy spare parts to help restore the engine but the children are unaware that they are really crooks needing Matilda to rob a London-bound mail van.

With Charlie driving, the children and Jones set out at dawn on a test run around the Barming loop. The mail train must wait two minutes where the loop meets the mainline - Galore uncouples the mail van from its engine and coshes the guard. Thanks to Galore's intervention, Matilda 'mistakenly' leaves the loop and joins the mainline. Jones urges Charlie to shunt the mail van off the line and back onto the loop 'in case it causes an accident'. Only when the train stops for the robbery's getaway van parked on the line does Jones reveal his deception.

Jones prepares to unload the van's cargo, but the kids rush Galore and Charlie shoots the train into reverse. Jones is trying to clamber over the roof to reach the engine when Matilda becomes involved in a chase with an express train from the mainline. Galore, meanwhile, manages to damage the brakes, sending the train hurtling out of control. A signalman sets the two trains on a course for London and Charlie and Arthur manage to clamber into the mail van and operate a manual brake, slowing Matilda down just enough before she hits the buffers at a nearby station.

Jones and Galore are dragged from Matilda by waiting police, while Lord Chalk, who has been travelling on the hurtling express train, emerges to congratulate the children on foiling the robbery and urges the local stationmaster to see they are given a reward which can be put towards a new private Barming line.