There was only a week between the German and Austrian GPs but Tyrrell found the time to finish off the first new 012 chassis for Michele Alboreto. As the Österreichring is at altitude, however, there was little hope of success for the normally-aspirated runners as the turbocharged engines performed better in the thinner air. Ferrari once again dominated practice with Patrick Tambay on pole from René Arnoux. Nigel Mansell showed well in the Lotus-Renault to take third place ahead of Nelson Piquet (Brabham-BMW), Alain Prost (Renault), Riccardo Patrese (Brabham-BMW) and Bruno Giacomelli (Toleman-Hart). The top 10 was completed by Eddie Cheever (Renault), Mauro Baldi (Alfa Romeo) and Derek Warwick (Toleman-Hart). The first non-turbo on this occasion was local hero Niki Lauda but he was way down in 14th on the grid.

At the start Tambay took the lead from Arnoux with Piquet, Prost and Mansell chasing. In the midfield there was more than a little chaos when Elio de Angelis (Lotus) lost control and collided with Giacomelli. Further back Piercarlo Ghinzani's Osella punted Jacques Laffite's Williams into Marc Surer's Arrows. This spun the Swiss driver and he was hit by Danny Sullivan's Tyrrell. Behind them Corrado Fabi (Osella braked heavily) and was rammed from behind by John Watson (McLaren).

For the first 21 laps the Ferraris ran 1-2 with Piquet and Prost fighting a lively battle for third. When Tambay and Arnoux came up to lap Jean-Pierre Jarier's Ligier on lap 22 Tambay was badly held up and Arnoux got ahead. So too did Piquet and with the Brabham making a better mid-race stop he was in the lead after the refueling. Tambay had gone with an oil leak. Piquet's lead lasted only until lap 38 and then he dropped back as his engine lost power and so Arnoux went ahead with Prost second. Prost closed and on lap 48 he took the lead and went through to win. Arnoux was second, Prost third, Cheever fourth, Mansell fifth and Lauda sixth.