It was nominally created in 1672 when Frederick William III, the last duke of Saxe-Altenburg, died and Ernest I, Duke of Saxe-Gotha (who had married Frederick William's cousin, Elisabeth Sophie), inherited the major part of his possessions. It was common for the Ernestine duchies to merge and split; Ernest's combined duchy was divided again after his death in 1675, and the Duchy of Saxe-Gotha-Altenburg proper came into existence in 1680 with the completion of this division and the accession of his eldest son, Frederick to the subdivision centered around the towns of Gotha and Altenburg.
Frederick's residence remained at Schloss Friedenstein in Gotha. He decisively secured his family's possessions with the implementation of the primogeniture in 1685. Nevertheless when the last dukes Emil August and his brother Frederick IV had both died without male heirs, the house of Saxe-Gotha and Altenburg became extinct in 1825 and quarrels arose between the three remaining Ernestine lines about the succession.
As a result of an arbitration issued by King Frederick Augustus I of Saxony in 1826, the Ernestine duchies were rearranged and Saxe-Gotha-Altenburg was again split: