Albert III, Duke of Austria

Albert, then the eldest surviving brother (the second-born son Frederick III had already died in 1362), inherited the rule and shared it with his younger brother Leopold III. Both were formally enfeoffed with the Duchy of Austria, Duchy of Styria, Duchy of Carinthia, and Duchy of Carniola by Emperor Charles IV. In 1369 the Habsburg dukes succeeded the late Meinhard III, Count of Gorizia-Tyrol in the County of Tyrol, when after a drawn-out conflict the Wittelsbach Duke Stephen II of Bavaria finally renounced his rights.

In 1368 the Habsburg brothers purchased the Swabian city of Freiburg. But their attempt to gain control over the Adriatic port of Trieste failed in an armed conflict with the Republic of Venice in 1369/70. Trieste was not won until 1382, when the citizens sought protection from Venice by subjecting themselves to Austrian rule. In 1374 the Austrian dukes inherited large territories in the Windic March and Istria from the late Albert III, Count of Gorizia, which they attached to the Duchy of Carniola. The next year they acquired the Swabian lordship of Feldkirch from the Counts of Montfort, the nucleus of the Habsburg possessions in later Vorarlberg.

Tension developed between the brothers, and in 1379 Albert and Leopold, by the Treaty of Neuberg divided the extended Habsburg territories. Albert received Austria proper (Austria Inferior), while Leopold get Styria, Carinthia and Carniola (Austria Interior), Tyrol (Austria Superior) and the dynasty's original possessions in Swabia (Austria Anterior). The division of the Habsburgs into the Albertinian Line and Leopoldian line was a significant disadvantage in competition with the rival Wittelsbach and Luxembourg dynasties. It persisted until 1490, when Archduke Sigismund of Tyrol and Further Austria handed over his estates to his cousin King Maximilian I.

In 1377, Albert went on a crusade in Prussia against pagan Baltic Lithuanian and Samogitian tribes.

Meanwhile, the expansion of the Habsburg dukes in Swabia collided with the growth of the Old Swiss Confederacy and sparked armed revolts. In 1386 Duke Leopold III and numerous Austrian nobles were killed in a disastrous defeat at the 1386 Battle of Sempach, whereafter Albert once again became sole ruler over the Albertinian and Leopoldian lands, acting as regent for his minor nephews. Another attempt to restore Habsburg rule in Swabia failed, when Albert's knights were again defeated by the Swiss pike squares in the 1388 Battle of Näfels and the duke had to call for an armistice.

Albert inaugurates the Collegium ducale (left), theological lecture (right), contemporary illumination

In the Austrian lands, his government was beneficial to the realm, as he supported the arts and sciences. Albert was an apt scholar himself, particularly as a mathematician and astrologer. The eldest preserved book of the Austrian National Library, a 1386 Evangelion, comes from his personal property. The duke expanded the University of Vienna and, during the Western Schism, reached the consent of Pope Urban VI to establish a theological faculty. He continued the building of St. Stephen's Cathedral and attempted to refurbish Vienna modelled on Emperor Charles' residence in Prague. Albert's nickname refers to his particular hairstyle, part of the vestments of a short-lived chivalric order (Zopforden) he had established and which dissolved upon his death.

By the end of his reign, Albert had established a firm princely rule over the Austrian duchy, stretching along the Danube from the Hungarian border on the Leitha River in the east to the Hausruck range in the west. In the conflict over the succession upon the death of Emperor Charles IV in 1378, Albert joined the forces of the Luxembourg heirs Jobst of Moravia and Sigismund against the incapable king Wenceslaus and seemed a likely candidate for the German throne himself. However, he died in August 1395 while staying in his Laxenburg hunting lodge, during the preparations of a military campaign to achieve Wenceslaus' deposition which took place in 1400. He is buried in the Ducal Crypt in the Stephansdom cathedral in Vienna.