Originally named "Banavie Junction", the junction was formed on 1 June 1895 when a short branch line to was opened. The branch left the West Highland Railway approximately one mile east of Fort William station. The junction was renamed "Mallaig Junction" on 30 March 1901, when the Mallaig Extension Railway opened. The former name "Banavie Junction" was however transferred concurrently to a new junction formed where the Mallaig railway left the existing branch to Banavie Pier. On 27 March 1988, the junction assumed its present name, "Fort William Junction", to avoid potential confusion with "Mallaig" in radio communications.
The Pier Railway of the Lochaber Narrow Gauge Railway originally crossed over the West Highland Railway and the Mallaig Extension Railway on separate bridges to the east of Mallaig Junction. Construction of a realigned Pier Railway, avoiding the site of Inverlochy village, commenced in 1927. It crossed the West Highland Railway on a bridge immediately west of Mallaig Junction. This bridge is still in situ but devoid of track following the complete closure of the narrow gauge line.
Signalling
From its opening in 1894, the West Highland Railway was worked throughout by the electric token system. Banavie Junction signal box opened on 6 August 1894. The signal box is located in the vee of the junction and remains operational today. It has been renamed twice during its existence, in line with the junction itself. The present lever frame, with 30 levers, dates from 1973. An 'NX' panel was added in 1975 to control the signalling at the relocated Fort William station. At the same time, the single line between the junction and the station became worked under Track Circuit Block regulations. Before the introduction of Radio Electronic Token Block to the West Highland Line, Mallaig Junction signal box worked to Spean Bridge and Banavie Canal Bridgesignal boxes on the routes towards Glasgow and Mallaig respectively. RETB was commissioned by British Rail between Mallaig Junction and Mallaig on 6 December 1987 and between Fort William Junction and on 29 May 1988. As a consequence, Fort William Junction S.B. now works only to Banavie Signalling Centre, on both routes.