One of the two confessed to planning to "kill as many people as possible outside the concert venue", officials said.
Three sold-out concerts were cancelled a day earlier because of the plot, devastating Swifties from across the globe, many of whom had dropped thousands of euros on travel and lodging in Austria's expensive capital city to attend the Eras Tour shows at the Ernst Happel Stadium.
The foiled attack was planned for Thursday or Friday, Interior Minister Gerhard Karner said.
Officials told reporters the 19-year-old Austrian suspect began working on his attack plans in July, and just a few weeks ago uploaded to the internet an oath of allegiance to the current leader of the Islamic State group militia.
He planned to use knives or homemade explosives to carry out the attack outside the stadium.
Vienna's Ernst Happel Stadium stood empty on Thursday after Taylor Swift's shows were cancelled. (AP PHOTO)
He was "clearly radicalised in the direction of the Islamic State and thinks it is right to kill infidels", said Omar Haijawi-Pirchner, the head of the Directorate of State Security and Intelligence.
During a raid of his home south of Vienna, investigators found chemicals and technical devices that indicated "concrete preparatory acts", said Franz Ruf, director-general for public security at the interior ministry.
Authorities also found Islamic State group and al-Qaeda material at the home of the second suspect, a 17-year-old Austrian.
He was employed a few days ago by a company providing services at the concert venue, and was arrested near the stadium.
The suspects' names were not released in line with Austrian privacy rules.
No other suspects were being sought, the interior minister said.
However, police interrogated a 15-year-old who had been in contact with both suspects.
"The situation was serious, the situation is serious. But we can also say: a tragedy was prevented," he said.
Barracuda Music said in an Instagram post on Wednesday that "we have no choice but to cancel the three scheduled shows for everyone's safety".
View this post on Instagram A post shared by Barracuda Music (@barracuda.music)
Austrian Chancellor Karl Nehammer posted on X that "the cancellation of the Taylor Swift concerts by the organisers is a bitter disappointment for all fans in Austria".
"The situation surrounding the apparently planned terror attack in Vienna was very serious," he wrote.
But thanks to intensive co-operation between police and Austrian and foreign intelligence, "the threat could be recognised early on, tackled and a tragedy prevented".
Barracuda Music said all tickets would be refunded.
An estimated 170,000 fans were expected for the concerts in Austria.
Swift is expected to perform at London's Wembley stadium in five concerts between August 15 and 20 to close the European leg of her record-setting Eras Tour.
UK police said there was nothing to indicate the investigation in Austria would affect Swift's concerts in London.
