The Austro-Hungarian Compromise of 1867, formalized by Act 12, established the dual monarchy that would come to define the political structure of Austria-Hungary. This agreement emerged from the turmoil following the Austro-Prussian War of 1866, leading to a reassessment of Austria’s position within Europe and its internal affairs. Recognizing the growing nationalism among Hungarians and other ethnicities, the Habsburg leaders decided to create a more balanced governance structure to placate Hungarian demands for autonomy. Under the terms of the Compromise, Hungary was granted its own parliament and considerable control over domestic policies, while foreign affairs and military matters remained under joint control with Austria.The Compromise was spearheaded by key political figures, including Hungarian statesman Lajos Kossuth and Austrian ministers like Eduard von Taaffe and Karl von Schwarzenberg, who negotiated the terms to ensure both Hungarian independence and Habsburg oversight. It was an essential step in modernizing the empire as it sought to balance the diverse national interests while preserving its integrity. The arrangement also allowed for the establishment of a separate Hungarian currency and tax system, which underscored Hungary's newfound status, yet continued resentment among other ethnicities highlighted the limitations of the agreement. The dual monarchy framework remained until the end of World War I, influencing Central Europe’s political dynamics for decades.