The Indiana Harbor Belt Railroad was formed in 1907. The Chicago Junction Railway, a New York Central affiliate, had leased the East Chicago Belt Railroad and the Terminal Railroad in 1898, and had bought the Chicago, Hammond & Western Railroad in 1896.
In October of 1907, the ECB's lease was dissolved, and it then acquired the CJ's interest in CH&W and assumed control of the Terminal Railroad as well. The new company was named the Indiana Harbor Belt Railroad. Although not a signatory, the New York Central provided the financial backing and quietly orchestrated the entire transaction, reserving trackage rights over all routes of the new railroad.
Shortly after the Harbor was formed, NYC leased to IHB the northernmost seven miles of the Chicago, Indiana & Southern. The CI&S originated at the Indiana Harbor lakefront and ran south through Gibson, where it crossed what is now the IHB main, to the Nickel Plate crossing at Osborn. The segment extending from the lakefront to Highland (crossing of the Erie Railroad) a few miles south of Osborn was leased to the Harbor. The IHB has operated it ever since and is now known as the Kankakee Line. South of Highland, CI&S extended to Danville, Illinois, and ultimately via connection with another NYC property to Cairo at the southern tip of Illinois. Traffic on the Harbor's portion was heavy enough to warrant double-tracking, which exists to this day. The Harbor then expanded its reach into the steel-making area along the lakefront by obtaining trackage rights from the Elgin, Joliet & Eastern and the Pennsylvania Railroad. The EJ&E and the Pennsy in turn were granted rights over IHB, enabling the J to reach Franklin Park and PRR to access the stockyards via the Terminal line. IHB also acquired a branch line across Wolf Lake on the Illinois-Indiana border to PRR's Colehour Yard at the lakefront, and in addition extended the ECB track further east to reach the Cudahy packing plant in East Chicago.
A final piece of the Harbor puzzle was the another NYC venture known as the Gary & Western, built around the time US Steel's enormous Gary Works was constructed. It extended east from Ivanhoe on the west side of Gary, Indiana, running through the central part of the city on an elevation. On Gary's east side it turned north toward the steel mill and then headed east again near the lakefront. Here, it connected to a segment of a Chicago, Indiana & Southern line that ran to what is now Burns Harbor, Indiana. Both the G&W and the CI&S route were owned by New York Central, but the Harbor operated them. They served several industries in Gary, and also hauled sand and other bulk commodities from the Burns Harbor area. When CI&S was folded into the New York Central System in 1914, the Harbor leased the G&W/CI&S route from the Central.