In 1517, Martin Luther, a German monk, began to attack many teachings and practices of the Roman Catholic Church. Nobles, peasants, and townspeople joined this movement, called the Reformation, and it spread quickly. Its followers became known as Protestants, meaning "those who protest".

Some princes were sincere reformers, but others became Protestants in order to gain church property. Many peasants hoped the Protestant movement would free them from their lord's control. The peasants revolted against the lords in the Peasants' War of 1524-1525, but were brutally crushed.

Neither the pope nor Emperor Charles V could stop the Protestant movement. In 1555, Protestant princes forced Charles to accept the Peace of Augsburg. This treaty gave each Lutheran and Roman Catholic prince the right to choose the religion for his own land. It also established a division of church lands between the two religions.

During the 1500's and 1600's, the Roman Catholic Church underwent its own reform, called the Counter Reformation or Catholic Reformation. In this movement, the church won back many Protestants by peaceful means or by force. By 1600, relatively few Protestants were left in Austria, Bavaria, and parts of Bohemia and the Rhineland. The rest of Germany remained chiefly Lutheran.