Mark Anthony Haines' body was found on tracks south of Tamworth in NSW on January 16, 1988, not far from a crashed stolen car.
An autopsy showed the Gomeroi teenager died from a traumatic head injury.
An initial police investigation concluded the 17-year-old laid on the tracks either deliberately or in a dazed state, something his family has never believed.
A coroner returned open findings in 1989, but a new inquest is re-examining the circumstances of Mr Haines' death and the original police investigation.
Soon after the discovery of Mr Haines' body was reported in the local newspaper, there was a rumour Tamworth boxer Eddie Davis was involved in his death, the inquest has been told.
Mr Davis's former partner Cherrie Dunning said a cousin told her about the rumour, but she didn't believe it.
"I never thought that he did it," Ms Dunning told the inquest sitting in Tamworth courthouse on Monday.
After Ms Dunning ended her relationship with Mr Davis, she spent a few months living with friends in Sydney about 1990.
One of the friends made a statement to police in September 1999, recalling Ms Dunning talking about how she was scared of Mr Davis partly because of his involvement in Mr Haines' death.
"You said that he'd killed a guy in Tamworth on the train tracks and put a pillow under his head?" Counsel assisting the coroner Chris McGorey asked, referring to the man's statement.
"I never said that at all," Ms Dunning said.
She denied telling the friends Mr Davis had come home late one night, soaking wet and covered in blood.
Mr McGorey again asked about details in the friend's police statement.
"You said you asked (Mr Davis) what happened and that they had stolen a car, pranged it and then you said that Eddie had put the young fella on the railway track and put a pillow under his head?" Mr McGorey asked.
"(You) also said Eddie had bashed him with an iron bar?"
But Ms Dunning denied she had that conversation with her friends.
"I might have mentioned that he was being accused of it ... but I never mentioned that he'd done it because I didn't know."
Mr Davis is due to be called as a witness at a later date.
The inquest continues before deputy state coroner Harriet Grahame.
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