The first section of the Bristol and Exeter Railway's main line opened on 14 June 1841 between Bristol and Bridgwater. Engineered by Isambard Kingdom Brunel, the line was originally built as 7 ft (2,134 mm) broad-gauge, but had been reconstructed as a mixed gauge line to accommodate local 4 ft 8 1⁄2 in (1,435 mm)-gauge traffic by 1 June 1875. Broad gauge trains ceased operation on 20 May 1892. The Portishead Branch Line, which diverged from the Bristol to Exeter Line at Parson Street Junction, the other side of a road bridge west of where the station would be built, had opened on 12 July 1867. It was only in 1871, with the opening of a station at Bedminster that there was a stop between the junction and Bristol Temple Meads.
As Bristol expanded in the early 20th century, the need for a new station to serve the outskirts grew, and on 29 August 1927, the Great Western Railway opened a station at Parson Street, named Parson Street Halt. There were two platforms, one on each side of the two running lines. There was a wooden shelter on the westbound platform, and a metal shelter on the eastbound platform. The platforms were made of wood, with access from the main road via steps. No goods facilities were provided.
The station was rebuilt in the early 1930s to cope with the relaying of the line west from Temple Meads with four tracks instead of two. Considerable engineering works were needed to cope with the widening of the station, including the removal of a short tunnel to the west of the station. The two new island platforms opened on 21 May 1933, and the station name was changed to simply Parson Street in November 1933. The new station included covered waiting shelters, and a booking office on the road bridge. Again, no goods facilities were provided.
DB Schenker Rail (UK) Class 66 locomotive 66053 hauls a coal train through Parson Street, having just left the Portishead Branch Line. Freight trains from Royal Portbury Docks are not an uncommon sight at Parson Street.
Parson Street railway station served a dual purpose: as well as serving local suburban developments for commuter and excursion traffic, it also acted as a minor interchange for passengers on the Portishead Branch Line. When Parson Street opened in 1927, there were 21 services each weekday along the branch, operated by the Great Western Railway at half-hour intervals from Temple Meads. There were 8 trains on Sundays.
Following the Second World War, service levels dropped dramatically along the Portishead branch. When the railways were nationalised in 1948, services at Parson Street came under the auspices of the Western Region of British Railways, and by the time the branch was closed to passengers in 1964, there were only six trains each weekday, and none on Sundays. With the closure of the branch, Parson Street lost its interchange status, and in January 1971 the station buildings were demolished. Some special services did continue along the branch to Ashton Gate, carrying fans to Bristol City FC games at the nearby Ashton Gate Stadium. These ceased in 1977, and Parson Street became the arrival and departure point for these trains.
The Bristol Area Resignalling Scheme in the 1970s saw the Down Relief line, the most southern of the four running lines, converted to a siding linking Malago Vale carriage sidings to the east with the West Depot carriage sidings to the west. At the same time, Parson Street Junction was reworked, requiring trains to first cross from the Down Main line to the Up Main line before they were able to access the Portishead Branch. The Down Relief line was removed altogether when West Depot closed sometime after the opening of a new depot at St Philips Marsh to service High Speed Trains.
British Rail was split into business-led sectors in the 1980s, at which time operations at Bedminster passed to Regional Railways. Local services were franchised to Wales & West when the railway was privatised in 1997, which was in turn succeeded by Wessex Trains, an arm of National Express, in 2001. The Wessex franchise was amalgamated with the Great Western franchise into the Greater Western franchise from 2006, and responsibility passed to First Great Western, a subsidiary company of FirstGroup. The franchise was rebranded Great Western Railway in 2015.
In recent years, there has been a marked increase in passengers travelling to and from Parson Street. In the 2002/03 financial year, less than 4,000 passengers used the station; and in 2005, only six eastbound and eight westbound trains called at Parson Street each day, with 14,293 passengers using the station during the 2005/06 financial year. Since then, service levels have increased to 21 westbound trains and 18 eastbound per weekday, and passenger levels have more than quadrupled, to 102,654 in 2013/14.
The campaign group Friends of Suburban Bristol Railways held a celebration in 2009 to mark the increase in passenger numbers. They were joined by pupils from Parson Street Primary School who had provided artwork to brighten up the station. This was done as part of the Severnside Schools Community Stations Programme, organised by the Severnside Community Rail Partnership. The Severnside CRP also installed plant displays in 2008, and in 2011 distributed leaflets advertising train services to local residents, in association with Bristol City Council and Passenger Focus. In January 2017 a group called Friends of Parson Street Railway Station was formed to lobby for improvements to facilities and services at the station.
In 2000/01, the track towards Portishead were relaid to allow rail access to Royal Portbury Docks. In 2010, another section of track was reinstated to allow the reopening of South Liberty Lane depot to handle Trans Ocean's wine import business, reducing road traffic. Seven trains terminate at the depot every week. The depot had closed in 1990 due to lack of demand for its facilities.