In 1244 the Duke of Austria, Emperor Friedrich II, granted Jews certain rights. Thus, during the thirteenth century, Austria became a center of Jewish learning and leadership for the German and western Slavic lands. During this time Jews held important governmental positions, administering taxes and mints. They were also very involved in trade. Immigration from Germany increased in the second half of the thirteenth century, and Jews began to encounter growing hostility fostered by the church. A fixed Jewish tax is mentioned in government records for the first time in 1320, and, soon after, massacres of Jews occurred.

The declared aim of this was to increase the contribution of Jews to the public. However, they faced strong opposition from the traditional guilds that fought this new competition. Jews remained active primarily in trade and the slow acquisition of capital led later to significant success of Jewish investors in the cloth and cotton industries of Bohemia and Moravia. Established Jewish bankers (such as the originally Viennese Rothschild family) used the new freedom to expand their businesses into other sectors. Still, immigration and ownership of land remained prohibited for Jews. Thus, this and other constraints prevented Jews from having full citizenship rights.

In 1918 there were 300,000 Jews in thirty-three communities within Austria, with 200,000 living in Vienna. The Treaty of St. Germain (1919) following World War I guaranteed the Jews minority rights, and Zionist Robert Stricker was elected to the Vienna city parliament. In the period of 1919-1934, Jewish schools and Hebrew classes opened their doors, and the Zionist organizations flourished.

The persecution of Austrian Jewry began with the Anschluss by Nazi Germany on March 13, 1938. At the time, there were 200,000 people living in Austria (180,000 in Vienna) that were classified as being Jewish according to the Nuremberg Laws of Nazi-Germany (full, half, quarter, or eight-Jewish). The Nazi regime immediately perpetrated acts of violence against the Jewish community throughout Austria. At first, systematic terrorization occurred mainly against property owning Jews and the intelligentsia. Street attacks and brutal persecution became daily occurrences. In May 1938, the Viennese Jewish community was permitted by the Nazis to organize mass emigration movements. Between July and September 1938 emigration reached a monthly average of 8,600.

In October 1938, Nazi riots broke out and Hitler gave instructions for the deportation of 27,000 Viennese Jews. During the pogroms of November, including Kristallnacht, approximately 8,000 Jews were arrested, and 5,000 of them sent to Dachau. In Vienna alone, forty-two synagogues were burned and 4,038 Jewish shops were looted. During the first four months of the war, 11,240 Jews succeeded in immigrating to neutral countries.

In October through November of 1941, 5,486 Jews were deported to the Lodz Ghetto. After the official prohibition on emigration in 1941, about 40,000 Austrian Jews remained. Of the 128,500 who had emigrated, 30,800 had gone to England, 24,600 to other European countries, 28,600 to the United States, 9,200 to Palestine, and 39,300 to fifty-four other countries.

At the end of 1941, 3,000 Austrian Jews were deported to the ghettos of Riga, Minsk, and Kovno. Between June and October 1942, 13,900 people were deported to Theresienstadt. The Viennese Jewish community was officially dissolved on November 1, 1942.

In the summer of 1943, there were approximately 800 Jews left in Vienna, but they had gone underground and were secretly hidden by members of the community.

Of the approximately 50,000 Jews deported from Austria to ghettos and camps only 1,747 returned to Austria at the end of the war. Another 20,000 Austrian Jews were killed after immigrating to other European countries, which eventually fell under Nazi rule. The number of Austrian Jews who perished in the Holocaust is estimated at 70,000.

After the war, there were many displaced people in Austria, some returned to their homes, but many immigrated to Israel after its formation in 1948. A small community did establish itself in Vienna and, in 1968, there was a small Jewish day school, a Jewish hospital, and an elderly home.

After the formation of Israel, Austria sought diplomatic relations with the State, and although somewhat tense at first, Austrias support for Israel in the Six Day War of 1967 helped strengthen ties.