During the sixteenth century, the Reformation broke the unity of Latin Christendom. That unity had already been weakened by Wycliffe's and Hus' reform movements, the rise of mysticism and popular millenarianism, and the critical attacks of humanists. In this context emerged Martin Luther, a man well-suited to lead a new reform movement. During a period of spiritual crisis Luther developed the theological tenets that undermined the church's spiritual power. He articulated these polemically in his Ninety-Five Theses against the sale of indulgences. Despite clerical and civil opposition, Luther's message spread throughout Germany. In addition to spiritual freedom, Luther preached obedience to secular authority, thus reinforcing his support among the nobility. This conservatism led Luther to denounce rebels, such as the participants in the Peasants' Revolt of 1524, who saw in his message the possibility of social change. Religious warfare continued until the Peace of Augsburg divided Germany into Catholic and Protestant regions.

Lutheranism spread throughout Europe, inspiring new versions of Protestantism. In Switzerland Zwingli and Calvin formulated major alternatives to Lutheranism. Stressing rigid discipline, obedience, and the predestination implicit in Luther's thought, Calvinism became one of the most important Protestant faiths in Europe. It spread from Geneva to France, the Netherlands, and Britain, where it evolved into a revolutionary ideology. In France the Calvinist Huguenots grew strong enough to wage civil war against the Catholic monarchy, and such strife continued until Henry IV imposed limited toleration through the Edict of Nantes. In England Henry VIII introduced the Reformation to realize his dynastic ambitions. Anglicanism became the state religion, surviving a brief return to Catholic rule under Mary and Puritan attacks during the seventeenth century. In southern Europe the clergy, backed by the Inquisition, quickly suppressed Protestantism. Protestantism made temporary gains in eastern Europe, especially in Hungary, but these countries were eventually brought back to Catholicism. The Reformation sparked rebellions among the poorer classes, members of which joined radical movements that advocated a priesthood of all believers. The largest of these movements was the Anabaptists whose seizure of Münster prompted Lutheran and Catholic authorities to join forces against them.

Initially, the Catholic response to the Reformation came from ordinary clergy and laypeople. The most important of these was Ignatius Loyola, whose Jesuits answered Protestant theology with a revitalized Catholic spirituality based on ceremony, tradition, and priestly forgiveness. Other Catholic revivalists built schools, and universities, and promoted a new style of religious art and architecture. Strengthened by the Council of Trent, the Counter Reformation church restored Catholic piety through a combination of education, church-building, preaching, persecution, and censorship.

The Reformation advanced the development of modern Europe in several ways. Some strains of Protestant thought furthered the growth of the modern state, while others provided the basis for challenging monarchical authority. The Reformation also promoted a spiritual individualism that complemented secular Renaissance individualism. Finally, the Protestant ethic contributed to the rise of modern capitalism.