Railroad Tycoon 3 is known to have issues with running on Windows 7 and Windows Vista. The most common issue appears to be related to hardware transform and lighting (hardware t&l) – an option that is enabled by default in Railroad Tycoon 3. The beauty of this setting is that you normally have to start the game to disable is. Seeing as it causes game startup crashes this isn’t really possible. Luckily there’s another way:

1. Install either patch 1.05 or unofficial patch 1.06. If you installed the game on steam, you’ll automatically be patched to version 1.05 so you don’t have to worry about this.
2. Download the “Vista Fix” (aka modified engine.cfg):
   Download link 1 <– Hawk and Badger (account required)
   Download link 2 <– Local mirror
3. Overwrite the engine.cfg with the downloaded version. The original engine.cfg is located in:
   Railroad Tycoon 3\Data\Configuration
   If you installed the game through steam you can find this file in the following directory:
   steam\steamapps\common\Railroad Tycoon 3\Data\Configuration
   To install the “Vista Fix” simply replace your version of the engine.cfg with the one you downloaded and restart the game!

If you’ve followed the above steps and are still having issues running Railroad Tycoon 3 on Windows 7, please post in the comments below. To increase your chances of a solution being found include as much detail as possible (which version of the game you’re running, what operating system you have, what video card you have and steps to reproduce the issue). Screenshots are also very useful!

Sources: link 1, link 2, link 3