Frederick was the youngest son of Duke Leopold III (1351–1386) and his wife Viridis (d. 1414),[1] a daughter of Bernabò Visconti, Lord of Milan.

When Frederick came of age in 1402, he was formally assigned to administer his father's inheritance in the scattered Habsburg territories in Swabia, referred to collectively as Further Austria (Vorderösterreich) and took his residence in Freiburg im Breisgau.

Back in Tyrol, he had to face the invading forces of Duke Stephen III of Bavaria, whom he defeated in the Lower Inn Valley.

Under the terms of the Western Schism, Duke Frederick sided with Antipope John XXIII, whom he helped on his flight from the Council of Constance in March 1415.

Thanks to the support of the local populace he managed to keep Tyrol, though he lost the western Aargau, the Freiamt and County of Baden estates, in the old homeland of the Habsburgs, to the Swiss.

After several rebellions by local nobles, his rule over Tyrol had stabilized, partially due to the successful beginning of silver mining that brought an increase in prosperity to the region.