Lower Horsely Fields was closed by fire crews and police shortly after 8am on Wednesday after flames and smoke were spotted coming from the arches near the tracks.
Train services were halted or cancelled as a result while traffic including bus services between Wolverhampton and Walsall were diverted from the A454 Willenhall Road at Moseley and from Horseley Fields.
Rail services resumed around 11am and Lower Horseley Fields was reopened to traffic by midday.
West Midlands Railway said: "Due to a fire on property near the railway between Wolverhampton and Birmingham New Street all lines are blocked. Train services running through these stations will be cancelled or delayed. Disruption is expected to last until around midday. There is ticket acceptance with Midland Metro and National Express West Midlands."
Abdul Karim, 53, owner of Wolverhampton Vehicle Hire, in Horseley Fields, was among those to telephone the brigade to report the fire.
"I arrived here at 7.15 and everything was fine. Then at about 8.02 I noticed smoke down at the railway near the bridge which I didn't think was anything of at first, but then it very quickly started billowing.
I saw flames so I reported it because we had a big fire there last year.
"A lot of businesses were affected by that. The fire service told me that somebody had already called them and that it was a caravan this time."
The incident also led to the bus operator National Express West Midlands diverting the 529 service from Willenhall Road to Stowheath Lane and Bilston Street and the number 82 service via Deans Road and Wednesfield Road in both directions.
Eastfields residents Lucy Smith, 36, a housewife, said: "They stopped the buses coming along Willenhall Road where I get on, so I had to walk all the way round the back roads, up Walsall Street and round to Shakespeare Street to get to Horseley Fields.
"I'm going to get my shopping in town and I usually go early and get the bus back by this time. I'm hoping the road is reopened by the time I'm finished. This really messes your day, but at least I've got my steps in for today with all this walking."
Fire crews from Wolverhampton, Fallings Park, Bilston, Willenhall and Wednesbury tackled the incident.
In a statement, West Midlands Fire said:: "This morning at 8am we were called to reports of a caravan on fire beneath an archway of a bridge off Lower Horsley Fields, Wolverhampton. The incident involves a caravan and a large quantity of rubbish well alight beneath the bridge archway."
"Due to smoke affecting the rail line, which runs over the bridge above the incident, a stoppage of rail travel has been requested. This will affect rail travel through this area and result in delays or cancellations of nearby rail services. Please follow Transport for West Midlands for rail travel updates.
"Lower Horseley Fields is also closed in both directions to allow safe working for our crews. No casualties are reported at this time."
The road was reopened to traffic by midday.
The latest fire happened near the scene of a huge factory fire last December which saw a number of businesses destroyed after arsonists struck.