This article demonstrates the fact that President Wilson was, until the last months of the war, hesitant to support the dissolution of Austria-Hungary. It also proves that the Secretary of State Robert Lansing had a major effect on the President’s decision making. In contrast, the group of experts The Inquiry, established by Colonel House with the aim of tackling the issues of peace settlement, lacked inner coherence and the group’s representatives were long in favour of federalization, rather than of the empire’s dissolution. The main aim of the present article is to unravel the real motives and the genesis of the President’s policy vis-à-vis Austria-Hungary. Yet another objective of this study is to help demystify the history of Central Europe after the First World War. The article also largely examines Austro-Hungarian policy toward the USA, which to this day has not been thoroughly studied.