Although the SDAP was the smallest of the three parliamentary blocs, it received a preeminent role in the postwar provisional government because it was perceived as best able to maintain public order in the face of the revolutionary situation created by economic collapse and military defeat. With Bauer's Marxist rhetoric and the party's strong ties to organized labor, the SDAP was able to outmaneuver the KPÖ for control and direction of workers' and soldiers' councils that sprang up in imitation of the revolutionary government in Russia. The SDAP suppressed the old imperial army and founded a new military force, the Volkswehr (People's Defense), under SDAP control, to contain revolutionary agitation and guard against bourgeois counterrevolution.

When parliamentary elections were held in February 1919, the SDAP won 40.8 percent of the vote, compared with 35.9 percent for the CSP and 20.8 percent for the Nationals. As a result, the Nationals withdrew from the coalition and left a SDAP-CSP government headed by Renner to negotiate a settlement to the war and write a constitution. At the peace talks in the Paris suburb of St. Germain, however, the Allies allowed no meaningful negotiations because Austria-Hungary had surrendered unconditionally. The Allies had decided that Austria was a successor state to Austria-Hungary, so the treaty contained a war-guilt and war-reparations clause and limitations on the size of Austria's military. Although the provisional government had declared the Austrian state to be a constituent state of the German republic, the treaty barred Austria from joining Germany without the consent of the League of Nations and compelled the new state to call itself the Republic of Austria rather than the German-Austrian Republic. After Austria's parliament approved these unexpectedly harsh terms, the Treaty of St. Germain was signed on September 10, 1919.

In setting the territorial boundaries of the Austrian state, sometimes referred to as the First Republic, the Allies were faced with the basic problem of carving a nation-state out of an empire in which ethnic groups did not live within compact and distinct boundaries. Austria received the contiguous German or German-dominated territories of Upper Austria, Lower Austria, Styria, Carinthia, Tirol (north of the Brenner Pass), Salzburg, and Vorarlberg, as well as a slice of western Hungary that became the province of Burgenland. Under the empire, however, no specifically "Austrian" identity or nationalism had ever developed among these provinces. Thus, despite a common language and historical ties through the Habsburg Dynasty, pressure from the Allies was necessary to keep even these contiguous areas together.

Although geographically contiguous and ethnically German, South Tirol was transferred to Italy as promised by the Allies when Italy joined the war. The Sudeten Germans were not geographically contiguous and could not be included in the new Austrian state. As a result, the Sudeten Germans were incorporated in the new Czechoslovakia. Austria's population numbered 6.5 million, as against Czechoslovakia's 11.8 million, of whom 3.1 million were ethnic Germans.

The constitution of 1920 established a bicameral parliament, with a lower house, the Nationalrat (National Council) elected directly by universal adult suffrage, and an upper house, the Bundesrat (Federal Council) elected indirectly by the provincial assemblies (see Government Institutions , ch. 4). In accordance with the SDAP desire for a centralized state, real political power was concentrated in the Nationalrat. Significantly, however, none of the three major parties was truly committed to the state and institutions established by the constitution. The SDAP goal was an Austria united with a socialist Germany, and the party's inflammatory Marxist rhetoric caused the other parties to fear that the SDAP could not be trusted to maintain democratic institutions if it ever achieved a parliamentary majority. Although the CSP under Seipel came closest to accepting the idea of an independent Austria, it preferred a monarchy over a republic. Seipel himself voiced increasingly antidemocratic sentiments as the decade advanced. The Nationals were fundamentally opposed to the existence of an independent Austrian state and desired unification with Germany.

Data as of December 1993