Human habitation of current Austria can be traced back to the first farming communities of the early Stone Age. The Celtic Kingdom of Noricum dating from ca. 800–400 BCE subsequently became incorporated into the Roman Empire's lands to the south of the Danube at the end of the first century BC, and was incorporated as the Province of Noricum around 40 AD. Later, in the sixth century, another Germanic people, the Bavarii occupied these lands until it fell under the Frankish Empire in the ninth century.

In the tenth century an eastern outpost of the Duchy of Bavaria, bordering Hungary, was established as the Marchia orientalis (March of the East) or 'Margraviate of Austria' in 976, ruled by the Margraves of Babenberg. This 'Eastern March', in German was known as Ostarrîchi or 'Eastern Realm', hence 'Austria'. From 1156 the Emperor Frederick Barbarossa created an independent duchy under the House of Babenberg, until its extinction in 1246, corresponding to modern Lower Austria.

Following the Babenberg dynasty and a brief interregnum, Austria came under the rule of the German king Rudolf I of Habsburg, beginning a dynasty that would last through seven centuries becoming progressively distinct from neighbouring Bavaria, within the Holy Roman Empire. The fifteenth and early sixteenth century saw considerable extension of the Habsburg territories through diplomatic means and marriage ties to include Spain, the Netherlands and parts of Italy. During the 17th and 18th centuries, Austria became one of the great powers of Europe and, in response to the coronation of Napoleon as the Emperor of the French, the Austrian Empire was officially proclaimed in 1804.

Thereafter, until World War I, Austria's history was largely that of its ruling house, the Habsburgs. Austria emerged from the Congress of Vienna in 1815 as the continent's dominant power. The Ausgleich of 1867 provided for a dual sovereignty, the empire of Austria and the kingdom of Hungary, under Franz Joseph I, who ruled until his death on Nov. 21, 1916. The Austrian-Hungarian minority rule of this immensely diverse empire, which included German, Czech, Romanian, Serbian, and many other lands, became increasingly difficult in an age of emerging nationalist movements. When Archduke Francis Ferdinand was assassinated by a Serbian nationalist in Sarajevo in 1914, World War I, as well as the destruction of the Austro-Hungarian Empire, began.