Purpose. Each country of the world pays great attention to the development of tourism in the country, since a significant part of revenues comprises the revenues from providing the tourist services. Ukraine faced the problem of a significant reduction in the volume of tourist flows, aging of capital fund, lack of investments for its renovation. Purpose of the article is to develop an optimal control mechanism of tourist flows, justifying the need for the development of inbound and domestic tourism. Methodology. A system analysis of the competitiveness problem of the tourism industry in the area of passenger rail transportations, theoretical principles of economics in the field of domestic tourism efficiency and management of tourist flows are the theoretical and methodological basis of the research. Findings. The authors developed an improved mechanism for managing tourist flows. It differs from the existing one by the expansion of services for tourists in the territory of Ukraine. The development analysis of inbound and domestic tourism, restoration narrow-gauge railways, as well as the creation of special tourist trains were proposed. As a result the following objectives should be achieved: 1) increase in the share of tourism and resorts in the structure of gross domestic product up to the level of developed countries; 2) the number of employees in tourism and resorts equal to the level of developed countries; 3) increase in total number of rooms in hotels and other certified accommodation facilities up to the level of developed countries; 4) creation of the effective system of monitoring the quality of tourist services; 5) creating an investment climate to attract the investments into development of the tourism, engineering, transport and communal infrastructure; 6) improvement of tourists safety, providing effective protection of their rights, legal interests and property. Originality. The author presented the theoretical generalization and new solution of the scientific problem. They lie in the development of theoretical and methodological approaches to justification of the organization of tourist rail transportations and activization of measures to realize the project to restore the effective functioning of the mountain railways with 750 mm width in the Carpathian region of Ukraine, with the possibility to incorporate them to the extensive international tourism network. Practical value. The rational measures according to the directions of tourism flows management proposed by the author will significantly increase the country revenues from tourism.