In 1936, Weyerhaeuser purchased from the Milwaukee Road a portion of the Milwaukee's line from Chehalis to Raymond. The line purchased extended about 18 miles from Chehalis to Dryad. The Milwaukee began operating over the parallel NP branch between those two locations; Weyerhaeuser named this new operation the Chehalis Western. It was an ICC-regulated common-carrier railroad, possibly because CW trains would be operating over portions of the Milwaukee Road and Northern Pacific on trackage rights to reach remote log reloads and the log dump at South Bay.
The CW only utilized the first 9 miles of the trackage purchased from the Milwaukee from Chehalis to Ruth. The trackage from Ruth to Dryad, about 9 miles, was removed by Weyerhaeuser. A new line was built from Ruth south into the woods at Camp McDonald, possibly reusing rail from the Ruth-Dryad segment. The Chehalis Western dieselized with a pair of Fairbanks-Morse H-10-44 switchers built in 1949, numbers 492 and 493. They were joined in 1968 by a rare Alco C-415 centercab switcher as number 684.
After the Milwaukee Road abandoned all operations west of Miles City, Montana, on February 28, 1980, the Weyerhaeuser purchased all of the Milwaukee trackage south of Tacoma, except for the Milwaukee's joint trackage (with the Union Pacific) to Hoquiam or the trackage rights over the BN to Raymond. All operations on the Vail line, the CM&E, and the former Milwaukee Road trackage would be operated by the resurrected "Chehalis Western", this time a private railroad not regulated by the ICC.
The Chehalis Western shut down in July 1992. Two of the four GP38-2's had been transferred to Weyerhaeuser's Golden Triangle Railroad in Mississippi in 1989. The GP7's were transferred to Weyerhaeuser's Columbia & Cowlitz Railway in Longview, WA. After operations ended in 1992, the remaining two GP38-2's were transferred to Weyerhaeuser's Texas, Oklahoma & Eastern. The rare C-415 was sold to the City of Tacoma, along with the entire railroad, about 1995. It was still (as of October, 2001) at Western Junction, it and the shop there was at that time leased to American Orient Express, which used the facility as a repair shop for its fleet of passenger cars.