Canberra's historic railway museum has been forced into liquidation, with many historic train carriages set to go to auction next month.

Former museum volunteer and heritage rail enthusiast Garry Reynolds is fearful the city's rail history will be lost with the sale.

"We're talking about carriages that took soldiers away down to the docks and the ships in World War I," he told Genevieve Jacobs on ABC Radio Canberra.

"They're that old.

"Then in World War II, we're talking about carriages that took soldiers to the hospitals, [soldiers] who had come back from the jungles of New Guinea by ship.

"I can't just sit around and let them go."

Soldiers from the 3rd Battalion (Werriwa Regiment) depart for WWII from Canberra Railway Station. ( Supplied: Australian War Memorial P11312.001 )

Museum derailed

The museum was forced to temporarily close its doors last year after falling more than $500,000 into debt.

Based at Kingston for 34 years, the museum was home to Australia's oldest and largest steam locomotives.

It was a popular attraction, offering trips from Canberra on a century-old steam train.

But Mr Reynolds said it cost about $3 million a year to maintain the engines and run the museum.

The City of Canberra, a Beyer-Garratt 6029 which was the largest operating steam locomotive in the Southern Hemisphere, was particularly expensive to run.

It would consume 18 tonnes of coal and 40,000 litres of water on average each day, costing around $10,000 a day.

The City of Canberra was moved to Sydney for upkeep after the museum closed in 2016. ( ABC News: Adrienne Francis )

D-day looms

"After the Supreme Court decision last Friday, it's all going to be wound up," Mr Reynolds said.

The museum's historic collection will go to auction on August 2.

"That's D-day," Mr Reynolds said.

"That's when a lot of this stuff is going to go, and go forever.

"In the future, someone will say, 'What were they doing? They knew this was important heritage but no-one did anything and it's gone, gone forever'."

In 2016 the museum reached a point where it could no longer cover costs. ( ABC News: Ian Cutmore )

Selling off Canberra's core

Mr Reynolds said the mainly volunteer-run organisation could do little more in its bid to save the museum.

"We tried as individuals to call on government, but it must be the cold in Canberra — they're just sitting on their hands to keep them warm.

"They don't appear interested in buying some of this rolling stock on behalf of the community.

"Some of these carriages are 110 years old and they're likely just to disappear and turn up as B&Bs or kids' cubby houses somewhere."

"This is part of Canberra's core story that we're selling off here."

Mr Reynolds said he hoped local organisations might be interested in purchasing some of the train carriages.

"I want to see this precious local history stay in Canberra.

"There could be corporations here who say, 'Here's a chance to make a real difference and secure Canberra's heritage'.

"The creditors do need to be paid, but there are some carriages that have a lot of connections to Australia's history that need to be kept.

"We're guilty in the future if we let these go."