A man is believed to have assaulted the guards before being killed.
The 26-year-old with the knife “died on the spot” after the soldier opened fired, according to police spokesman Harald Moeser.
The country’s Ministry of Defence said the solider used pepper spray to try and stop the attack but was then forced to use his gun.
Vienna police confirmed the shooting on Twitter.
They said: “Iranian residence: unknown attacker shot with a knife of surveillance posts of the Austrian Federal Army. Details currently unclear.”
One of the surveillance officers is in hospital following an injury to the upper arm sustained in the attack, they added.
The incident took place at about 11.35pm, local time.
The current motive behind the attack is unknown but security is said to have been increased at all embassies across the capital city.
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