The army group was formed in June 1916 under the command of Archduke Karl in order to stop the Russian advance during the Brusilov Offensive.

[4] During the summer, the Archduke's forces were reassigned to join the German 9th Army in Romania, which had declared war on the Central Powers in August.

The 1st Army, which was part of Archduke Karl's command, then guarded the northeastern border of Transylvania with Romanian-controlled Moldavia, which was where the Romanian government was based.

Command of the new formation was given to Archduke Joseph August and it was transferred to the Italian Front, with von Seeckt remaining as the chief of staff of the reorganized army group chief of staff and Hauptmann Johann "Hans" Hasse (1878–1968) as signals-officer (both from the Imperial German Army) into December 1917.

[6] The army group was the only Austro-Hungarian formation that was independent of German command at that point in the war, although the chief of staff Seeckt exercised a lot of control over its operations.