In 1374 the Austrian dukes inherited large territories in the Windic March and Istria from the late Albert III, Count of Gorizia, which they attached to the Duchy of Carniola.

In 1386 Duke Leopold III and numerous Austrian nobles were killed in a disastrous defeat at the 1386 Battle of Sempach, whereafter Albert once again became sole ruler over the Albertinian and Leopoldian lands, acting as regent for his minor nephews.

Another attempt to restore Habsburg rule in Swabia failed, when Albert's knights were again defeated by the Swiss pike squares in the 1388 Battle of Näfels and the duke had to call for an armistice.

The duke expanded the University of Vienna and, during the Western Schism, reached the consent of Pope Urban VI to establish a theological faculty.

Albert's nickname refers to his particular hairstyle, part of the vestments of a short-lived chivalric order (Zopforden) he had established and which dissolved upon his death.

By the end of his reign, Albert had established a firm princely rule over the Austrian duchy, stretching along the Danube from the Hungarian border on the Leitha River in the east to the Hausruck range in the west.

In the conflict over the succession upon the death of Emperor Charles IV in 1378, Albert joined the forces of the Luxembourg heirs Jobst of Moravia and Sigismund against the incapable king Wenceslaus and seemed a likely candidate for the German throne himself.