David James was England's villain as they squandered a two-goal lead.
Frank Lampard put England ahead in the World Cup qualifier following a clever free-kick after Austria goalkeeper Alex Manninger handled a back-pass.
Steven Gerrard added a second with a stunning strike after 63 minutes, before Roland Kollmann's free-kick gave Austria hope seven minutes later.
Austria's unlikely comeback was complete inside two minutes when James let Andreas Ivanschitz's shot slip in.
Gerrard passed a late fitness test on his groin injury and played a part in a dominant England first 45 minutes.
They took the lead after 23 minutes in bizarre fashion.
England were awarded a free-kick 10 yards out after Manninger picked up a pass from Martin Stranzl in his area.
Stranzl claimed he only played the ball towards Manninger after hearing a whistle, but it did not come from Slovakian official Michel Lubos.
Beckham passed up the chance to shoot on goal, cleverly finding the unmarked Lampard to score from close range.
Manninger's eventful evening continued as he was fortunate to escape a red card five minutes before the interval.
Lampard's pass sent Owen clear, and Manninger was clearly outside his area when he handled his goal-bound effort.
The officials were not up with play, leaving Manninger's offence unpunished.
Alan Smith should have doubled England's advantage after 51 minutes when Owen set up the Manchester United striker eight yards out, but Manninger produced a magnificent one-handed reflex save.
Austria were finally sparked into action by the mistake, and John Terry needed to scramble a goal-line clearance after James' reckless dash left Mario Haas with a clear sight of goal.
But England survived the scare to add a second, courtesy of a stunning goal by Gerrard after 63 minutes.
He received Owen's pass 25 yards out and swept a magnificent strike into the top corner past the helpless Manninger.
Austria gave themselves hope seven minutes later when substitute Kollmann curled home a brilliant free-kick.
And the unlikeliest of comebacks was complete when James had one of his nightmare moments two minutes later.
Ivanschitz's drive from well outside the area appeared to pose no danger until James inexplicable dived over the ball, sparking joyous scenes in the Austrian camp.
England sent on Jermain Defoe in a desperate bid to repair the damage, and the in-form Spurs striker almost snatched victory with a snap-shot that struck the outside of the post.
Austria: Manninger, Standfest, Hiden, Pogatetz, Stranzl, Aufhauser (Kiesenebner 74), Sick, Kuhbauer, Ivanschitz, Haas (Hieblinger 89), Glieder (Kollmann 68).
Subs Not Used: Mandl, Dospel, Katzer, Linz.
Goals: Kollmann 71, Ivanschitz 73.
England: James, Neville, Terry, King, Ashley Cole, Beckham, Gerrard (Carragher 82), Lampard, Bridge (Joe Cole 84), Smith (Defoe 76), Owen.
Subs Not Used: Robinson, Dyer, Wright-Phillips, Vassell.
Goals: Lampard 24, Gerrard 64.
Ref: Michel Lubos (Slovakia).