Match report below from BBC Wales
 Ramon Caliste should have doubled Wales' lead |
Markus Berger was the unfortunate Austrian as he headed into his own net, having been wrong-footed by Craig Morgan's header across goal.
Striker Ramon Caliste missed a golden chance to double the lead after the break, before Morgan, Arron Davies and Craig Davies had efforts well saved.
Austria were restricted to long-range efforts as the Welsh produced one of their best displays in recent years.
The victory keeps Wales fourth in Group Six and still with a huge task to qualify, but manager Brian Flynn was delighted with the performance that gave him a first win in his second stint in charge.
Flynn gave Craig Davies his Wales debut , and the Oxford striker made an immediate impression by setting up strike partner Caliste for the game's first shot on target after just 37 seconds.
 |  We could have had more and we made their keeper work hard and make several good saves to keep the score down. Wales Under-21 manager Brian Flynn |
An uneven and lively pitch at Merthyr's Penydarren Park made for difficult passing conditions, so Wales began to make the most of Davies' height by opting for a direct aerial route.
Both he and Caliste enjoyed early dominance against the Austrian defenders, and a foul against Manchester United striker Caliste led to the first goal.
Wrexham defender Morgan rose at the far post to head Peter Gilbert's free-kick back towards goal, and Berger's attempted headed clearance looped over goalkeeper Ramazan Ozcan into the net.
Austria's forwards had little change from Wales centre backs Morgan and Richard Duffy, with goalkeeper Lee Worgan well protected on his first full appearance.
A long-range shot from Jurgen Samuel was the closest they came to a shot on target in the first half before Christian Thonhoffer wasted a rare opening by slicing horribly wide.
 Craig Davies proved a handful on his Wales debut |
Wales ended the half with three decent attempts on goal.
Davies almost capped an impressive first 45 minutes of international football with a goal, but his 25-yard drive and then a far-post header went narrowly wide.
Captain David Pipe then forced Ozcan into a save after a forceful run down the right.
Wales continued to win the 50-50 challenges in midfield after the break, and a typical determined challenge from Joe Ledley carved out another chance for Caliste.
Ledley's perfectly weighted pass split the visitors' defence, but Caliste's attempted chip over the on-rushing Ozcan went wide.
Wales were fortunate not to concede a goal on the hour mark when a first mistake from Lee Jon Beevers gave Mario Conrad a sight of goal, but the substitute only found the side netting.
The home side responded by immediately going up the field and almost double their lead.
The impressive midfielder Arron Davies made space for himself just outside the box, but Ozcan made a magnificent save as Davies' drive headed for the top-right corner.
Ozcan saved his side again on 75 minutes when he tipped over Morgan's header from a corner, and then deflected Craig Davies' drive past the post.
Kyle Critchell and David Cotterill came off the bench in the closing stages to won their first caps as Wales held on comfortably to secure a rare victory.
Wales U21: Lee Worgan, Lee Jon Beevers, Peter Gilbert, Andrew Crofts, Craig Morgan, Richard Duffy, David Pipe (capt), Arron Davies, Craig Davies, Ramon Caliste, Joe Ledley.
Subs: Byron Anthony, Lewin Nyatanga, Kyle Critchell, Matthew Crowell, David Cotterill, Adam Birchall, Wayne Hennessey.
Austria U21: Ozcan, Gercaliu, Garics, Sonnleitner, Berger, Fuchs, Thonhofer, Kulovits, Kienast, Saumel, Lasnik.
Subs: Probst, Metz, Schiemer, Kramner, Holzl, Mimm, Konrad.
Referee: G Rossi (San Marino)