A 14-year-old boy was killed in Saturday afternoon's attack in the centre of Villach and five other people were wounded, three of whom are in intensive care, police said.
Interior Minister Gerhard Karner told a press conference in Villach that the 23-year-old Syrian man, who was arrested seven minutes after the first call to the police, had been rapidly radicalised on the internet and that the Islamic State flag had been found in his apartment.
"There's compassion, there's sadness, but in these moments there's also understandably often anger and rage," Karner, a conservative, told reporters.
"Anger at an Islamist attacker who randomly stabbed innocent people here in this town."
Karner also said the authorities should have greater powers to screen asylum seekers and there would have to be "mass checks without cause in many areas" since the suspect had not attracted the authorities' attention.
Police said the man, who is being charged with murder and attempted murder, had recorded himself swearing an oath of allegiance to Islamic State.
More harm would have been done had it not been for another Syrian, a food delivery man, who saw the attacker and drove into him with his vehicle to stop him, authorities said.
Islamic State has not claimed responsibility for the attack so far.
However, the media section of IS's Afghan branch, Islamic State Khorasan (ISIS-K), recently circulated a post calling for lone wolf attacks in America and Europe following a New Year attack in New Orleans, according to SITE Intelligence.
The bloodshed in Villach followed the thwarting of a plot in August to carry out a suicide attack at a Taylor Swift concert in Vienna by a teenager who had also sworn loyalty to Islamic State.
Saturday's rampage also came just days after an attack on Thursday in Munich in neighbouring Germany by an Afghan national who drove his car into a crowd, injuring dozens of people, two of whom later died.
It took place during an extended period of political tension in Austria, where the far-right Freedom Party (FPO) - which came first in September's parliamentary election - said last week it was unable to form a coalition government.
Centrist parties are now discussing whether they could try to form a government while the president considers options including moving the country towards a snap election.
Across the border in Germany, recent immigration from Muslim countries and the integration of asylum seekers has become a charged political issue heading into a snap election on February 23.
Railing against illegal immigration and pledging to increase deportations to countries such as Syria and Afghanistan, to which it is currently illegal to deport people, are central to the FPO's platform.
The party quickly seized on the Villach attack.
"No migrant would be able to commit murder or any other crime in our country if they were not in Austria in the first place," FPO leader Herbert Kickl said in a statement.
Officials from other parties condemned the attack while calling for the country to remain united.
"The Islamist perpetrator will be prosecuted to the full extent of the law. Because hatred, intolerance and extremism have no place in our open, pluralistic society," conservative Chancellor Alexander Schallenberg, whose government is serving in a caretaker capacity, said on social media platform X.
21°C