Having suppressed a rising at Mainz Frederick set out in the autumn of 1163 for Italy, which country was now distracted by a papal schism. This incident was bound to affect German politics. After the death of Adrian IV. in 1159 the imperial party put forward an anti-pope, Victor IV., against Alexander III., who had been canonically elected. The emperor made stupendous efforts to secure for Victor and then for his successor, Paschal III., recognition by the sovereigns of Europe, but in vain; and almost the only support which the anti-pope received came from the German clergy. In May 1165 Frederick held a diet at Würzburg, where the princes lay and clerical swore to be faithful to Paschal and never to recognize Alexander. But Alexander soon found partisans among the German clergy, hitherto the most loyal of the emperor's friends; and Frederick retaliated by driving the offending prelates from their sees, a proceeding which tended to disturb the peace of the land. Then in August 1167, in the midst of the struggle in Italy, came the pestilence which destroyed the imperial army in Rome, and drove the emperor as a fugitive across the Alps. After this humiliation Frederick remained for six years in Germany. He was fully occupied in restoring order in Saxony, in the diocese of Salzburg and elsewhere; in adding to his hereditary lands; in negotiating for a better understanding with France and England; and in reminding the vassal states, Hungary, Poland and Bohemia, of their duties towards the Empire. The success with which he carried out this work shows clearly that, in Germany at least, the disaster at Rome had not seriously affected his prestige. Again in Italy in 1174 the contest with the Papacy was abruptly ended by Frederick's overwhelming defeat at Legnano in May 1176, and by the treaty of Venice made about a year later with Alexander III.
In the later years of his reign the emperor's chief enemy was Henry the Lion. Rendered arrogant by success and confident that his interests were in northern, and not in southern Europe, the Saxon duke refused to assist Frederick in the campaign which ended so disastrously at Legnano. Ascribing his defeat to Henry's defection, Frederick returned to Germany full of anger against the Saxon duke and firmly resolved to punish him. The immediate cause of Henry's downfall, however, was not his failure to appear in Italy, but his refusal to restore some lands to the bishop of Halberstadt, and it was on this charge that he was summoned before the diet. Three times he refused to appear, and early in 1180 sentence was pronounced against him; he was condemned to lose all his lands and to go into banishment. For some time he resisted, but at length the emperor in person marched against him and he was forced to submit; the only favour he could secure when peace was made at Erfurt in November 1181 was permission to retain Brunswick and Lüneburg, which have remained in the possession of his descendants until our own day. Bavaria was granted to Otto of Wittelsbach, but it lost some of its importance because Styria was taken from it and made into a separate duchy. The extensive duchy of Saxony was completely dismembered. The name was taken by the small portion of the former duchy which was given to Bernard, son of Albert the Bear, the founder of a new Saxon line, and the extensive western part was added to the archbishopric of Cologne. The chief prelates of Saxony and many of the late duke's most important feudatories were made virtually independent of all control save that of the crown. Frederick's object in thus breaking up the two greatest duchies in his kingdom was doubtless to strengthen the imperial authority. But in reality he made it certain that the princes would one day shake off the imperial power altogether; for it was perhaps more difficult for the sovereign to contend with scores of petty nobles than with two or three great princes.