The Treaty of Prague was signed on August 23, 1866, effectively ending the Austro-Prussian War, a conflict primarily between the Kingdom of Prussia and the Austrian Empire. This war arose from political conflicts regarding the leadership of German states. The initial trigger was the administration of Schleswig and Holstein, territories that had been taken from Denmark. The war showcased Prussian military innovations and decisive leadership under figures like Otto von Bismarck and Helmuth von Moltke. The Prussians achieved a series of quick victories, leading to the occupation of significant territories in Austria.

The signing of the Treaty took place in Prague, marking a clear shift towards a Prussia-dominated North German Confederation. Austria was forced to cede control of territories like Holstein and Schleswig to Prussia, diminishing its influence over German affairs. Furthermore, the treaty excluded Austria from German unification processes, allowing Prussia to consolidate power among the German states, leading to greater nationalism. The treaty also resulted in the dissolution of the German Confederation, which had previously included both Austria and Prussia, further entrenching the division in German politics.

While the Treaty of Prague brought an end to military conflict, it did not resolve underlying tensions between the German states. It served as a pivotal moment for the subsequent unification of Germany in 1871, with Prussia emerging as the preeminent power among the German states. This expansion of Prussian influence set the stage for the eventual proclamation of the German Empire in the Hall of Mirrors at Versailles, further complicating European power dynamics leading into the 20th century.