There was only a week between the German and Austrian races and so there were no major changes. Team Lotus had decided to run a third car for a youngster called Nigel Mansell. The entry was thus 26 cars with 24 qualifying. As it turned out Jochen Mass was unable to race as he had gone off in practice and rolled his Arrows in a ploughed field, damaging his neck slightly. This meant that the only non-qualifier was Jan Lammers in the Ensign.

With the track being at altitude there was no surprise to see the two Renault turbos at the front with René Arnoux just ahead of Jean-Pierre Jabouille. Then came the two Williams's of Alan Jones and Carlos Reutemann. Then came the Ligiers of Jacques Laffite and Didier Pironi, Nelson Piquet's Brabham, Bruno Giacomelli in the single Alfa Romeo (the team had still not replaced Patrick Depailler who had been killed a fortnight earlier). The top 10 was completed by Elio de Angelis's Lotus and Derek Daly's Tyrrell. There was more disappointment with the Ferraris with Gilles Villeneuve 15th on the grid and Jody Scheckter 22nd.

Jones made a good start to snatch the lead from Arnoux while Giacomelli made a great start to sneak into third. By the end of the first lap, however, Bruno had been overtaken by Pironi and Jabouille. The Renault driver then passed the Ligier as well. And so Jones had two Renaults behind him. It was clear that they were a lot stronger than the Williams and by the fourth lap Arnoux was ahead with Jabouille second and Jones third. Pironi soon dropped back and fourth place went to Giacomelli with Reutemann and Piquet following him through. In the midfield Daly had a frightening moment when he spun off and found himself heading for a barbed wire fence. Fortunately the car spun as it approached the wire.

Piquet now charged up to pass Reutemann and Giacomelli. On lap 21 the leader was in the pits for new tyres and so Jabouille went into the lead with Jones second. Arnoux rejoined in 10th place. Soon afterwards Piquet dropped back with clutch problems and so third place was inherited by Reutemann (who had overtaken Giacomelli). In the closing laps Jabouille ran into tyre trouble and Jones closed right up but the Renault crossed the line just under a second ahead.

Reutemann was third with Laffite fourth, the struggling Piquet fifth and de Angelis sixth. Mansell's debut ended on lap 41 with an engine failure. The Englishman suffered some petrol burns having raced with his overalls soaked when the Lotus mechanics splashed him with fuel by accident before the start.

The result gave Jones an 11-point lead in the World Championship.