The Peace of Prague was a peace treaty

Peace treaty

A peace treaty is an agreement between two or more hostile parties, usually countries or governments, that formally ends a state of war between the parties...

 signed at Prague

Prague

Prague is the capital and largest city of the Czech Republic. Situated in the north-west of the country on the Vltava river, the city is home to about 1.3 million people, while its metropolitan area is estimated to have a population of over 2.3 million...

 on 23 August 1866, which ended the Austro-Prussian War

Austro-Prussian War

The Austro-Prussian War was a war fought in 1866 between the German Confederation under the leadership of the Austrian Empire and its German allies on one side and the Kingdom of Prussia with its German allies and Italy on the...

. The treaty was lenient toward the Austrian Empire

Austrian Empire

The Austrian Empire was a modern era successor empire, which was centered on what is today's Austria and which officially lasted from 1804 to 1867. It was followed by the Empire of Austria-Hungary, whose proclamation was a diplomatic move that elevated Hungary's status within the Austrian Empire...

 because Otto von Bismarck

Otto von Bismarck

Otto Eduard Leopold, Prince of Bismarck, Duke of Lauenburg , simply known as Otto von Bismarck, was a Prussian-German statesman whose actions unified Germany, made it a major player in world affairs, and created a balance of power that kept Europe at peace after 1871.As Minister President of...

 had persuaded William I

William I, German Emperor

William I, also known as Wilhelm I , of the House of Hohenzollern was the King of Prussia and the first German Emperor .Under the leadership of William and his Chancellor Otto von Bismarck, Prussia achieved the unification of Germany and the...

 that maintaining Austria's place in Europe would be better in the future for Prussia

Prussia

Prussia was a German kingdom and historic state originating out of the Duchy of Prussia and the Margraviate of Brandenburg. For centuries, the House of Hohenzollern ruled Prussia, successfully expanding its size by way of an unusually well-organized and effective army. Prussia shaped the history...

 than harsh terms. Austria only lost Venetia, ceded to Napoleon III of France

Napoleon III of France

Louis-Napoléon Bonaparte was the President of the French Second Republic and as Napoleon III, the ruler of the Second French Empire. He was the nephew and heir of Napoleon I, christened as Charles Louis Napoléon Bonaparte...

, who in turn ceded it to Italy

Italy

Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

. Austria refused to give Venetia directly to Italy because the Austrians had crushed the Italians during the war. The Habsburg

Habsburg

The House of Habsburg , also found as Hapsburg, and also known as House of Austria is one of the most important royal houses of Europe and is best known for being an origin of all of the formally elected Holy Roman Emperors between 1438 and 1740, as well as rulers of the Austrian Empire and...

s were permanently excluded from German affairs (Kleindeutschland). The Kingdom of Prussia

Kingdom of Prussia

The Kingdom of Prussia was a German kingdom from 1701 to 1918. Until the defeat of Germany in World War I, it comprised almost two-thirds of the area of the German Empire...

 thus established itself as the only major power among the German states. The North German Confederation

North German Confederation

The North German Confederation 1866–71, was a federation of 22 independent states of northern Germany. It was formed by a constitution accepted by the member states in 1867 and controlled military and foreign policy. It included the new Reichstag, a parliament elected by universal manhood...

was formed, with the north German states joining together, and the Southern
German states having to pay large indemnities to Prussia.