The Treaty of Prague (23 August 1866) ended the Austro-Prussian War of 1866, and saw the Austrians withdraw from German affairs and acknowledge the supremacy of Prussia in northern Germany. Prussia gained some four million citizens, and leadership of a North German Confederation.
The most important campaign of the war was the Prussian invasion of Bohemia, which resulted in the crushing Prussian victory at Königgrätz on 3 July 1866. Although the fighting continued for another two weeks, the outcome of the war wasn't really in doubt. The defeated Austrian army retreated east then south, but the most direct route to Vienna was cut after the Prussian victory at Tobitschau on 16 July. The two armies then moved south on opposite sides of the Carpathian Mountains, and the Prussians only just beat the Austrians to the Danube, winning one more victory at Blumenau (22 July 1866), on the approaches to Pressburg, on the same day that the first armistice came into effect.
The first Austrian peace feelers came on 4 July, when Gablenz was sent to seek an armistice. At this point the Prussians weren't ready for a truce, but were willing to open peace negotiations. Galbenz returned to the fortress of Königgrätz with nothing agreed. Gablenz returned to the Prussian camp on 8 July with more concrete terms - an eight week armistice with the armies pausing on their current positions. Once again these terms were rejected. It would take more serious diplomatic negotiations to bring around an armistice.
The peace negotiations were complicated by the intervention of Napoleon III. On 4 July he announced that the Austrians had asked for his mediation, breaching an earlier promise to Bismarck to stay neutral. Bismarck was briefly worried that this was the build-up to a French entry into the war, but in reality all Napoleon really wanted was some prestige. In addition his Italian allies were involved on the Prussian side, and he was never likely to intervene against them. Napoleon's only real contribution was to insist on a plebiscite in northern Sleswig, which Bismarck quickly agreed to but was never able to implement.
The peace negotiations probably caused more conflict within the Prussian hierarchy than between the Prussians and Austrians. Bismarck wanted to secure Prussia's position in northern Germany, but he had little interest in expanding Prussian influence into the Catholic south, and none in taking land off the Austrians. The last thing he wanted to do was turn Austria into a long-term enemy.
Bismarck had originally aimed at the creation of a North German Confederation, led by Prussia. After the Prussian victory at Königgrätz his attitude hardened, and he decided that Prussia needed to directly annex large parts of northern Germany. These terms were put to the Austrians and Napoleon III, but the Prussian ambassador in Paris didn't press them, and so Napoleon didn't originally push them.
The military leadership had more varied aims. Moltke was amongst the moderates, although he was opposed to the idea of accepting an armistice until the Austrians had officially agreed to Prussia's terms. The defeat of Prussia's Italian allies meant that the Austrians were able to rush reinforcements north, and he was worried that they might regain their confidence and try to defend the line of the Danube and Vienna.
Other senior officers had more extreme views, with many determined not to stop until they had crossed the Danube and occupied Vienna, as an aim in its own right rather than as a means towards gaining a more favourable treaty.
King Wilhelm of Prussia's views changed as the fighting continued. At the time of Königgrätz he wanted Prussia to annex the duchies of Schleswig and Holstein, which were already in Prussia hands, limit Austria's position in Germany and increase Prussia's power over the smaller north German states. However he was opposed to Bismarck's determination to depose the northern German rules. As the army advanced towards the Danube the king's attitude hardened, and he began to support army demands to cross the Danube.
There were several clashes between Bismarck and the military. On 15 July he managed to scupper a plan to storm the fortifications of Florisdorf, pointing out that the two weeks needed to summon the heavy siege artillery would give Napoleon III even more time to interfere in the negotiations.
On 18 July the Royal Headquarters moved to the castle of Nikolsburg. On the following day the arguments between Bismarck and the military reached a low point, when the generals appeared to have got their way, and preparations were put in place for the crossing of the Danube.
News from Paris now saved Bismarck's position. Napoleon III accepted the Prussian demands for annexations, and the news reached Nikolsburg soon after the crisis of 19 July. Bismarck was now able to insist on a five day armistice, to begin on 22 July. This only affected the Austro-Prussian front. A separate armistice came into effect in Italy on 25 July, but fighting continued in western Germany until the start of August.
Formal peace talks began on 23 July. The Austrians were willing to agree to Bismarck's terms, and the Prussian military had now been largely won over by his diplomatic successes. King Wilhelm was now the major obstacle to peace, insisting that some territory be taken from Saxony, who he blamed for the war, and from Austria. Bismarck later claimed that he came close to resigning, but was saved by the Crown Prince, who convinced his father to accept Bismarck's terms.
The preliminary peace terms were signed on 26 July by Bismarck and Moltke for Prussia and Count Karolyi and General Degenfeld for Austria on 26 July. The truce was extended to 2 August, when it would be replaced by a formal armistice that included all fronts.
Terms of the Treaty
The treaty formally acknowledged Prussia's position as the major power in northern Germany.
She officially annexed the Duchies of Schleswig and Holstein, the Kingdom of Hanover, Electoral Hesse, the Duchy of Nassau and the city of Frankfurt.
A new North German Confederation was formed, with Prussian leadership. Its members included Saxony.
Austria agreed to abandon any authority in southern Germany. The south German states were given the freedom to form their own Confederation if they so desired, although this didn't happen in the short gap before full German unification.
Austria paid a war indemnity of forty million thalers.
In Italy the Austrians agreed to give up Venetia, but were left free to defend the South Tyrol.