The Midland Metro would be extended from Wolverhampton to Walsall replace a former rail service, under new plans being considered by transport bosses.
Campaigners have been calling for years for a rail service between the city and the town to be reinstated.
Rail operators are refusing to do so because they cannot make enough money from offering the service, which was scrapped in 2008.
An hourly service service had been run between the two stations but passengers now have to go via Birmingham New Street or take the bus.
But transport authority Centro believes it could use the specially made trams that would also work on the rail tracks.
The service would link up with a new £15 million extension of the Midland Metro planned for Wolverhampton city centre which will see the current tram extended from Bilston Street, past the bus station in Pipers Row and on to Wolverhampton rail station.
Work is due to start in 2015 if funding can be found and it could pave the way for the extension of the network to Walsall.
Centro would need new infrastructure to get trams to run along the old train tracks.
A pilot scheme is set to open in South Yorkshire in 2015 which bosses are going to be watching.
In the meantime they will continue trying to press the case for the Walsall to Wolverhampton rail line to be reopened but recently admitted it was unlikely to happen before at least 2019.
Tom Magrath, director of policy and strategy at Centro, said: “Centro will continue to actively promote the potential for the reinstatement of the Walsall to Wolverhampton rail service within our various plans.
“However, tram-train potentially offers an alternative solution to the lack of rail connectivity which could offer significant benefits over heavy rail including lower operating costs, better access to urban centres and improved interchange with other transport modes.”
He said there had been previous work to look at making a full rail service more attractive but that it would need to be a half-hourly train and would require a new bay platform at Wolverhampton station.
The extension of the station platform would be a ‘significant challenge” because it would need a signal box to be demolished and would cause further congestion.
“Use of tram-trains on the route between Walsall and Wolverhampton would present an alternative solution to the need to create additional bay platform at Wolverhampton station”, Mr Magrath said.
“Tram-trains for Wolverhampton could instead leave the existing rail line before the station, dropping down in the Freeman Street area to pass under the existing rail lines and make an end on connection with the proposed extension of Midland Metro line to the Wolverhampton station forecourt.
“Such services could then continue to Wolverhampton Interchange and, if required, to other destinations or terminate at Wolverhampton St Georges via a new tramway curve.”
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