Real estate tycoon Henry Huntington established The Pacific Electric Railway in 1901 by the consolidation of many smaller railroads. Henry Huntington also tried but failed to gain control of Southern Pacific Railroad which his uncle, Collis P. Huntington, had founded. Only a few years after the company's formation, most of Pacific Electric stock was purchased by the Southern Pacific Railroad, which, in what was called the "Great Merger" of 1911, Southern Pacific Railroad bought out most of Huntington's railways except for the Los Angeles Railway, a the narrow gauge street car system known locally as "Yellow Cars" and also the Pasadena and Pacific Railway.
Following these acquisitions Pacific Electric was the largest operator of interurban electric railway passenger service in the world with over 1,000 miles (1,600 km) of track. The system ran to destinations all over Southern California, particularly to the south and east.
During the Roaring Twenties profits were good and the lines were extended to the Pasadena area, to the beaches at Santa Monica, Del Rey, Manhattan/Redondo/Hermosa Beach, Long Beach in Los Angeles County and to Newport Beach and Huntington Beach in Orange County. Extra service beyond the normal schedules was provided on weekends, particularly in the late afternoon when everyone wanted to return at the same time. Comedian Harold Lloyd highlighted the popularity and utility of the system in an extended sequence in his 1924 film, Girl Shy, where, after finding one Red Car too crowded, he commandeers another and drives at breakneck speed through the streets of Culver City and Los Angeles.
The Pacific Electric operated frequent freight trains under electric power throughout its extensive service area (as far as 55 mile distant San Bernardino and 50 mile distant Redlands near Riverside), including operating electrically-powered Railway Post Office routes, one of the few U.S. interurbans to do so. This provided important revenue. The PE was responsible for an innovation in a grade crossing safety device that was quickly adopted by other railroads which was the fully automatic electromechanical grade crossing signal nicknamed the "wigwag". A few wigwags continued operation as of 2006.
During this period the Los Angeles Railway provided local streetcar service in central Los Angeles and to nearby communities. These trolleys were known as the "Yellow Cars" and actually carried more passengers than the PE's "Red Cars" since they ran in the most densely populated portions of Los Angeles, including south to Hawthorne and along Pico Boulevard to near West Los Angeles to terminate at the huge Sears Roebuck store and distribution center (which was the L.A Railway's most popular line, the "P" line). The Yellow Cars' unusual narrow gauge PCC cars, by now painted MTA two-tone green, continued to operate until the end of rail service in 1963 to the Sears complex on Pico Boulevard.
Large profits from land development were generated along the routes of the new lines. Huntington Beach was incorporated in 1909 and developed by the Huntington Beach Company, a real-estate development firm owned by Henry Huntington, which still owns both land in the city and most of the mineral rights.
There are other local 'streetcar suburbs'. Angelino Heights was built around the Temple Street horsecar, which was later upgraded to electric streetcar as part of the Los Angeles Railway Yellow Car system. Highland Park was developed along the Figueroa Street trolley lines and railroads linking downtown Los Angeles and Pasadena. Huntington owned nearly all the stock in the 'Pacific Electric Land Company'. West Hollywood was established by Moses Sherman and his partners of the Los Angeles and Pacific Railway. Moses Sherman, Harry Chandler, Hobart Johnstone Whitley, and others bought the entire southern San Fernando Valley in 1910. The electric railway and a "$500,000" boulevard called Sherman Way connected the 3 townsites they were selling. These included Van Nuys, Marion (now Reseda), and Owensmouth (now Canoga Park). Parts of Sherman Way are now called Chandler Bl and Van Nuys Bl.