Once again a Habsburg emperor became king of Hungary, but the compromise strictly limited his power over the country's internal affairs, and the Hungarian government assumed control over its domestic affairs. The Hungarian government consisted of a prime minister and cabinet appointed by the emperor but responsible to a bicameral parliament elected by a narrow franchise. Joint Austro-Hungarian affairs were managed through "common" ministries of foreign affairs, defense, and finance. The respective ministers were responsible to delegations representing separate Austrian and Hungarian parliaments. Although the "common" ministry of defense administered the imperial and royal armies, the emperor acted as their commander in chief, and German remained the language of command in the military as a whole. The compromise designated that commercial and monetary policy, tariffs, the railroad, and indirect taxation were "common" concerns to be negotiated every ten years. The compromise also returned Transylvania, Vojvodina, and the military frontier to Hungary's jurisdiction.

At Franz Joseph's insistence, Hungary and Croatia reached a similar compromise in 1868, giving the Croats a special status in Hungary. The agreement granted the Croats autonomy over their internal affairs. The Croatian ban would now be nominated by the Hungarian prime minister and appointed by the king. Areas of "common" concern to Hungarians and Croats included finance, currency matters, commercial policy, the post office, and the railroad. Croatian became the official language of Croatia's government, and Croatian representatives discussing "common" affairs before the Hungarian diet were permitted to speak Croatian.

The Nationalities Law enacted in 1868 defined Hungary as a single nation comprising different nationalities whose members enjoyed equal rights in all areas except language. Although non-Hungarian languages could be used in local government, churches, and schools, Hungarian became the official language of the central government and universities. Many Hungarians thought the act too generous, while minority-group leaders rejected it as inadequate. Slovaks in northern Hungary, Romanians in Transylvania, and Serbs in Vojvodina all wanted more autonomy, and unrest followed the act's passage. The government took no further action concerning nationalities, and discontent fermented.

Anti-Semitism appeared in Hungary early in the century as a result of fear of economic competition. In 1840 a partial emancipation of the Jews allowed them to live anywhere except certain depressed mining cities. The Jewish Emancipation Act of 1868 gave Jews equality before the law and effectively eliminated all bars to their participation in the economy nevertheless, informal barriers kept Jews from careers in politics and public life.

Data as of September 1989