The Peace of Augsburg came as a result of the Reformation that occurred in Western Europe, which brought forth dissent within the Roman Catholic Church, leading to the beginning of Protestantism. Martin Luther’s attempts at pushing for reformation of the Roman Catholic Church from within failed, forcing him to revolt after being excommunicated. The active revolt and open defiance of the Catholic Church earned Luther an increasing number of supporters leading to the start of Lutheranism.

It was clear that there was need to settle the religious issues and the Peace of Augsburg achieved the settlement by ending the struggle between Lutheranism and Roman Catholicism.  Leaders of different states were allowed to choose between Roman Catholicism and Lutheranism as the official religion of their territories under the principle Cuius regio, eius religio (Whose region, his religion). Subjects of the different states opposed to the official religion were allowed to immigrate to other states that conformed to their religious inclinations.

The Peace of Augsburg, basically, was the "legalization" of Catholicism and Lutheranism in the country of Germany. This was signed into effect on September 25, 1555.

The initial move to "legalize" the religions of Catholicism and Lutheranism was made in 1552. Given that the Charles V did not wish to acquiesce to the demands being made.

The main aspects of the Peace of Augsburg were:

- Peace was to be maintained between both the Catholic and Lutheran practitioners.

-Lutheran royalty was to have the same securities as those of the Catholics.

-Every principality was to decide if they were to practice Catholicism or Lutheranism, all other religions were not allowed.

-Principalities under control of a non-Catholic prince would give up prior religious control and be controlled by the Church.

-Imperial cities were to keep the named religious parity during the time of the Truce of Passau.

-Church lands were to legally belong to the Augsburg Confession already in their possession at the time of the Truce of Passau.

-People would be able to move from principality to principality in order to keep their own personal preference of religion (only if Catholic or Lutheran).

Violence broke out as a consequence of Martin Luther's protests against the Catholic Church, a protest that began with the Ninety-Five Theses on the Power and Efficacy of Indulgences he posted on the door of All Saints' Church in Wittenbeg, Germany. Among the many violent insurrections was the bloody Peasants War in Germany, between 1524 and 1525, in which the peasant class, led by the Protestant clergy, revolted against the aristocracy for economic and religious persecutions. By 1547, the Holy Roman Emperor Charles V knew that peace between religious factions needed to be established and issued the Augsburg Interim of 1548. However, the peace established under the Augsburg Interim was only temporary, mostly because it primarily reflected Catholic views. By 1555, Charles V understood that a new peace treaty would need to be issued and proclaimed the Peace of Augsburg.

The Peace of Augsburg forbade any rulers from waging future wars based on religious grounds. It also legally recognized the two separate churches, the Roman Catholics and the Lutherans.

Some of the treaty's most important principles concerned governing, in an effort to establish peace by unifying people under one religion or the other in any one area. More specifically, the treaty made it legal to have only one church in any region of the empire, and the church was decided upon by the ruler of the region, not the subjects. But any subjects who objected to the religion of the ruler were free to move from the territory. Furthermore, the treaty granted rulers' legal freedom to change religions if wanted while also legally protecting citizens from likewise having to change religions.

The one exception to rulers choosing the religion of an area applied to the Free Imperial Cities that had evolved into self-ruling cities beginning in the 13th and 14th centuries. Such cities included the French cities of Comar, Haguenau, Mulhouse, and Strasbourg; the German cities of Augsburg, Cologne, Memmingen, Ravensburg; and the Switzerland city of Basel. Since these cities were already self-governing, they had already achieved religious integration (Encyclopaedia Britannica, "Peace of Augsburg").