The Oxfordshire box, dating from 1901, was reduced to rubble overnight as campaigners watched from a bridge.
One protester said former signalmen would be "turning in their graves", while another described the flattened Banbury North box as a "crime scene".
Network Rail said it was replacing more than 800 remaining signal boxes with 12 Regional Operating Centres (ROCs).
It said the change would deliver savings of up to Â£250m a year while allowing "greater control" over the network.
The company delayed the demolition of the box to allow railway fans to take farewell tours in 2016.
More than 3,500 visitors came to look at its bells, levers and coal-fired stove, between 10 August and 2 October.
Banbury Civic Society supported plans to convert the box into an education centre but the project failed to raise sufficient funds.
Rob Kinchin-Smith, its acting chair, said the company had demanded that the campaign raise Â£168,000 in three weeks to save it.
He took to social media to rue the demolition, commenting: "The party's over and the star guest departs... Banbury North, it was great knowing you."
Mr Kinchin-Smith said the interior of the box had been saved with a view to reconstructing it for future public display.
Rails bosses said the stretch of track was now controlled from Rugby ROC, whose wider view of the network and modern traffic management software could help to reduce rail delays.
A century-old signal box has been demolished despite a campaign by railway enthusiasts to save it.