As shown in the episode of the same name (Haunted Train), the legend concerns the phantom locomotive, Old Engine 25. Forty years ago, during a movement from the train yard to Union Station, Engine 25's engineer suddenly went insane. Defying signals and warnings to slow down, he intentionally derailed the engine and its train which slid down a high embankment. However, no wreckage was found beyond the engineer's severed hand, still clutching a part of Engine 25's throttle.
According to the legend, the engineer drove the train straight to the fiery underworld, and now once a year on the anniversary of the engine's derailment, returns aboard Engine 25 with the intent of collecting new passengers to return to the underworld with him.
The legend as told by Grandpa
Grandpa: Forty years ago old engine 25 was heading for the station when the engineer went mad and drove his train off the tracks. They never saw him or the train again. Some say he drove it straight to... you know.
Grandpa: All the way Downtown, to the very most southern point...!
Arnold: You mean...?
Grandpa: That's right.
Gerald: Wow, he drove all the way to the South Pole?
Grandpa: No! He drove the train straight down to the fiery underworld!
Arnold and Gerald: Wow...
Grandpa: Every year on the anniversary of its last ride Engine 25 comes back. The mad engineer at the throttle. He's on his way to the old train station to pick up unknowing passengers. His unexpecting passengers are drawn onto the train by a blinding white light, It hypnotizes them. Then a strong smell overpowers them. Some say it smells like rotten eggs, but I'll tell you what it is, it's the smell of...
Grandpa: No, fiery brimstone. Then they start to hear a horrible ear-splitting music, it shrieks and moans in the chill (?) of your heart. It's not of this world! It's... inhuman. After the music the train then enters the zone of darkness!
Grandpa: In the zone of darkness they can feel the heat from the flames. Then the train comes to a compete stop. The doors open, and they are greeted by the red hot demon himself!
Kids: (start talking)
Grandpa: You know what the night is, don't you? It's the fortieth anniversary! I'd sure hate to be at the old train station tonight! The one on the 53th past Livingstone. You know, the one next to tire shop there.
The legend as sung by Gerald
They say he lost his mind;
The legend as sung by the Haunted Train Engineer himself
Sometimes, late at night,