By the mid-1880s, the urban sprawl had swallowed up Penge, and significant housing development had taken place around the station. During this decade, the station underwent numerous alterations. To the south of the platforms, the Station Master’s garden and the level crossing were abolished, the platforms extended, and a new fully enclosed footbridge erected to replace the existing one. The signal box alongside the crossing was closed, the ‘’down’’ platform extended over its site, and a brick-built gentlemen’s toilet erected there. A new, larger signal cabin opened at the northern end of the ‘’down’’ platform. This was a product of the LC&DR’s favoured signalling contractor, Saxby & Farmer. It was brick-built throughout, featured a slated hipped roof, and sliding windows – cabins of the same design also came into use at Gillingham and Faversham. At this time, the platform canopies received wrap-a-round timber sides, in effect becoming giant waiting shelters. To the north, minor changes in the ‘’up’’ side goods yard saw the goods shed lose one of its two tracks. In spite of this, both wagon turntables were retained. By 1912, these turntables had disappeared.
Under the Southern Railway, the ex-LC&DR station became ‘’Penge East’’ on 9th July 1923; the ex-LB&SCR site became ‘’Penge West.’’ Electrification of the lines from Victoria and Holborn Viaduct, to Orpington via Bickley Junction, took place during 1925. In conjunction with these works, new platform run-in boards with prefabricated concrete surrounds (sourced from Exmouth Junction works) were installed, and the SR’s trademark swan-neck gas lamps came into use. The station remained in this form for the rest of its SR existence, and changes were not afoot until after the formation of British Railways. By 1955, the forecourt canopy had disappeared, but the rest of the site remained completely intact. As part of the Kent Coast Electrification Scheme, the section of line between Herne Hill and Beckenham Junction was re-signalled with colour lights. These were brought into use on 12th April 1959, and thereafter Penge East signal box switched out of use. The latter was retained to work the goods sidings and could be brought into use in an emergency, should there be a track circuit failure in Penge Tunnel. The goods yard was formally closed to traffic on 7th November 1966 and the goods shed flattened; the signal box followed on 25th February 1968. By 1976, four sidings remained in situ at the northern end of the site: three on the ‘’up’’ side (the remnants of the goods yard), and one on the ‘’down’’ side. By 1983, just one of these tracks remained, that which ran immediately behind the ‘’up’’ platform. This was retained for the engineering department.
Penge Tunnel was the second longest on the LC&DR, at 2141-yards; it was bettered only by Lydden Tunnel, Shepherds Well, at 2369-yards in length. That at Penge had been excavated through London clay and took the railway under the grounds of Crystal Palace. The waste clay extracted from the boring operation was used to manufacture bricks for the tunnel’s lining, a brick-making plant being established at one of the tunnel's portals. Steam and smoke could escape through seven ventilation shafts. Two disc signals were installed within the tunnel: the Sydenham Hill ‘’up’’ distant and the Penge ‘’down’’ distant, situated 500 yards from western and eastern portals respectively. The tunnel’s darkness and the smoke from locomotives made these signals very difficult to see, thus in 1875 one W. R. Sykes installed the world’s first electric signals at Penge Tunnel. These were in fact the equivalent of today’s Banner Repeater signals, and could be found at the portals either end of the tunnel, hinged on a central pivot. Thus, whatever the distant signals within the tunnel were showing would be repeated by the electric signals at each portal.