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The 'Austro-Hungarian Compromise of 1867' (, ) established the Dual Monarchy of Austria-Hungary. It was signed by Emperor Franz Joseph of Austria and a Hungarian delegation led by Ferenc Deák. The compromise followed a series of failed constitutional reforms of the Habsburg Empire. The compromise granted the Hungarian government nearly equal status to the Austrian government in Vienna, while the common monarch retained responsibility for the army, navy, foreign policy, and customs union. The compromise was made under dire circumstances by the monarchy in an attempt to quiet dissent in the face of aggression from Prussia, as well as internal agitation by the various nationalities of the Empire.
The compromise was violently unpopular with many ethnic minorities of the multinational Empire, most notably Czechs and Romanians; although these formed a substantial percentage of the overall population of the new Austria-Hungary, they were not invited to be signatories.
The former revolutionaries — German and Magyar — became de facto "peoples of state", each ruling half of a twin country united only at the top through the Emperor-King and the common Ministries of Foreign Affairs and of War. Each half of the country had its own Prime Minister and parliament: in Hungary the Diet was restored to power. The special status of Transylvania and the Military Frontier ended. A new Nationalities Law was adopted to preserve the rights of ethnic minorities, but was often violated in practice.
Every ten years, details of the compromise were renegotiated, invariably resulting in internal crises as the Hungarian side often escalated their demands.
The Dual Monarchy established by the Compromise was intended as an interim solution, but it lasted for 50 years until 1918 when it was dissolved in the aftermath of World War I.
Many in the Austrian half of the monarchy resented the new influence of the Hungarian government. The Hungarian government generally resisted internal reform, and pursued linguistic policies that resulted in the marginalization of most of the non-Magyar nationalities in Hungary. The Hungarian government also blocked financing to modernize the army, since they feared its use against them (the army was primarily controlled by Vienna). The resulting political deadlock may have influenced the fateful decision by the Austrian leadership to attack Serbia in July of 1914.