A few years after the independence from the Ottoman Empire in 1878, on March 22 1882 the Council of Ministers of the young Principality of Bulgaria granted to the Austro-Hungarian Empire an area for the construction of the premises of their diplomatic mission. In winter 1883 the new building in boulevard Tzar Osvoboditel, whose project had been commissioned to architect Peter Paul Brang by the then Head of Mission, Baron Von Biegeleben, was officially opened. In the following years the area belonging to the Austro-Hungarian Empire was further extended and reached in 1908 its present boundaries: Shipka Street on the northern side, Paris street on the western side, boulevard Tzar Osvoboditel on the southern side, the former Legation of the Kingdom of Italy (today Austrian Embassy) on the eastern side. In 1908 architect Ludwig Richter implemented a renovation of the building which gave it the present configuration; inter alia, he added the new northern wing on Shipka Street hosting today the offices of the Italian Diplomatic Chancery.
On November 14 1918 a part of the building of the Austro-Hungarian Delegation (which had been already closed by the Viennese authorities following the collapse of the Habsburg Empire) was occupied by General Mabelli, head of the Italian Military Mission under the joint Anglo-French command, and by Minister Plenipotentiary Baron Aliotti, who was Commissioner of the Kingdom of Italy. Extensive negotiations took place between the two countries until February 14 1925, when the parties eventually agreed upon a swap of the two buildings. Thus, Italy came into possession of the present compound with garden, whereas the Austrian Embassy took the former premises of the Italian Legation, a New Renaissance Venetian-style building erected between 1905 and 1910 on a project of architect Enrico Bovio.