The following two centuries featured two important rivaling princely families, the Hohenstaufen of Swabia who held both the imperial and German crowns, and the Welf from Bavaria and Saxony with alliance to the papacy.

The Salian line died out with the death of Henry V in 1125. For fear that his nephews, Frederick and Conrad Hohenstaufen would endeavour to revive royal power, the princes avoided electing them in favour of Lothair, Duke of Saxony. This promptly led to conflict with the Hohenstaufen family and when finally Conrad Hohenstaufen was elected king upon Lothair's death in 1138, the family feud continued to rage not only in Germany but in Italy as well, where the Welf were intent on curbing the Hohensaufen imperial ambition.

Frederick I, known as Frederick Barbarossa given his red beard was Conrad's nephew and succeeded him in 1152. His reign was to last until 1190 and most of this time was spent by the monarch travelling back and forth between both Germany and Italy in an effort to restore imperial power in both countries. By marrying Beatrice, heiress to Burgundy he managed to join Germany with Burgundy.

Despite the fact that he was crowned emperor in Italy most city states in the northern part of the country refused to support him and together with the papacy opposed Frederick by forming the Lombard League, under leadership of Pope Alexander III. Despite numerous attempts to conquer Italy, Frederick ultimately failed to restore power. Dying in 1190 while leading the Third Crusade, he was succeed by his son Henry VI, an extremely ambitious ruler with his sights set on conquering the known world.

Forcing the northern Italian cities under his rule and gaining Sicily through a death in his wife's family, he also tried unifying the peninsula under the Hohenstaufen name. Unable to make royal succession hereditary, he did manage to secure a pledge through with the German crown would go to his son, Frederick II. Henry VI's intentions for a Mediterranean empire were stopped short when he died suddenly of natural causes in 1197.

Given that Frederick II was only three years old at the time, Henry's work came rapidly undone, with the north Italians reasserting their independence and the Germans refusing to accept a child king. While the infant's uncle Philip served in the child's place, other factions elected a counter king, Otto IV, and civil strife ensued. Frederick II returned to Germany in 1215 where his election was secured by Pope Innocent III and began his rule.

Frederick is considered to be one of the most talented, diplomatic and capable rulers of the Middle Ages. He focused mainly on Italy, where he set up his court and was noted for his excellence as an artist, scientist and poet.

In order to gain support in Germany, where he spent little of his time, he agreed to various substantial concessions to the nobles of the land, stipulated in the Privilege of Worms (1231), notable increasing their power within their respective territories. Little was done by Frederick to unify Germany and by the time his son died in 1254, the Great Interregnum followed, lasting until 1273. This was a time of complete anarchy with no centralized power whatsoever and individual princes competing arduously to further their own interests.

While enduring the political chaos of the time, Germany began developing on other levels. Trade began to grow and towns acquired certain levels of independence, the population increased to 14 million by 1300 and the number of towns also increased immensely. City halls, cathedrals, town halls and guildhalls were built, as were canals and roads, beneficial to furthering trade. The southern and western areas of Germany were the most heavily urbanized.