Isabella was notable for her brief marriage to Prince Georg of Bavaria. Their separation and subsequent annulment were widely reported in newspapers. As a result of this and her later actions as a nurse in the Austrian army, Isabella became considered as a romantic figure; one publication called her "the most romantic heroine of the present war in Austria".

Isabella was the seventh daughter of Archduke Friedrich, Duke of Teschen and his wife Princess Isabella of Croÿ. Some of her siblings included Maria Anna, Princess of Bourbon-Parma and Maria Christina, Hereditary Princess of Salm-Salm.

Isabella's paternal grandparents were Archduke Karl Ferdinand of Austria and Archduchess Elisabeth Franziska of Austria. Her maternal grandparents were Rudolf, Duke of Croÿ and Princess Natalie of Ligne.

On 10 February 1912, Isabella married her distant cousin Prince Georg of Bavaria. He was the elder son of Prince Leopold of Bavaria and his wife Archduchess Gisela of Austria. The wedding took place at the Schönbrunn Palace in Vienna, and was attended by many important figures, including Franz Joseph I of Austria, Prince Georg's maternal grandfather. Before the wedding, Isabella renounced all rights of succession to the Austrian and Hungarian thrones, an act required of all archduchesses when they married, regardless of the groom's rank. She solemnly made her renunciation in front of the entire Viennese court.

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