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Railway networks form an integral part of the infrastructure development of a developing country with ever-increasing passenger and freight volume. Increase in train speed, pay load, reliability, and safety are the major thrust areas for railways requiring more stringent mechanical properties such as wear, deformation resistance, and fatigue life from the railway steel. Steel chemistry control and thermomechanical processing significantly affect final properties and performance of the railway steel. For example, for a given steel composition, a number of stable or metastable microstructures can be obtained by controlling heat treatment operations. Conventional rail steels primarily contain nearly eutectoid pearlitic microstructure, which is dependent on the criticality of the application. An overview of the physical metallurgy principles involved during the manufacturing of rail steel will be provided here. The primary focus of this review is thermal processing including quenching and accelerated cooling of the rail steel. In addition, other important aspects relating to design and production of rail steel are discussed, including: impact of steel chemistry on the phase diagram, effect of thermomechanical processing on microstructure, and influence of microstructure or residual stress on mechanical properties.