Austria accounts for more than a third of the UN Force.
Austrian soldiers were scurrying into bunkers for cover earlier on Thursday.
The country accounted for 380 out of the 1,000-strong UN force observing decades-old ceasefire between Syria and Israel. Their departure would deal a blow to the mission.
“Freedom of movement in the area de facto no longer exists. The uncontrolled and immediate danger to Austrian soldiers has risen to an unacceptable level,” Chancellor Werner Faymann and his deputy Michael Spindelegger said in a joint statement.
It came hours after Syrian rebels seized a UN-manned border crossing linking Syria and Israel. Israeli security sources later reported Syrian troops had retaken it after heavy fighting.
This shows that a “further delay in pulling out soldiers is no longer justifiable,” the Austrian statement said.
Austrian Defence Minister Gerald Klug cancelled his appointments and summoned emergency staff after news of the fighting reached him.
Mr. Spindelegger informed UN Secretary-General, Ban Ki-moon, of Austria’s decision to withdraw its soldiers after nearly four decades of peacekeeping duty on the Golan.
Austria’s defence ministry was in contact with the UN department of peacekeeping operations “to create the conditions for an orderly withdrawal of Austrian peacekeepers,” it added.
The blue-helmeted ranks of UNDOF, the United Nations Disengagement Observer Force, had seen Japanese and Croatian troops depart since the Syrian conflict began in 2011.
The Philippines, the other main contributor of combat troops, said that it might also exit after several cases where Syrian rebels held its peacekeepers captive. India also has soldiers there.
Diplomats said in the past that Fijian soldiers were likely to fill some of the gaps, but it was unclear if this was still feasible. In any event, the disappearance of the critical Austrian contingent is expected to cause the UN big problems.
Austria, the only EU member of UNDOF, had repeatedly warned it could pull its peacekeepers from the Golan should the EU drop a weapons embargo on Syria and arm rebels fighting President Bashar al-Assad.
It relaxed the threat in May after Britain and France – not the whole EU – said they were ready to arm rebels, but the government had made it clear that it was monitoring the situation closely and would pull troops out if risks grew.
UNDOF, essentially with Austrians in the north and Filipinos in the south, polices a 75-km ribbon of demilitarised zone running from the mountainous Lebanese border in the north to Jordan in the south, separating Syria from the Israeli-held Golan Heights, a plateau first seized from Syria in 1967.
Forty-four members have died since UNDOF was set up in 1974, some in accidents, but until the Syrian conflict erupted, the ceasefire proved one of the most stable in the Middle East, with neither Syria nor Israel willing to challenge the status quo.
“It has been a very successful peacekeeping mission for a very long time and it has managed to maintain a balance between Israel and Syria which has worked very well,” said Paul Beaver, a London-based independent defence analyst.
The recent skirmishes, however, have called into question just how the peacekeeping force works when a third player complicates the task of separating Israel and Syria.
He said it was too early to predict the consequences of Austria’s move.
If the peacekeeping mission were to be weakened or disbanded completely, “that will be a serious loss,” he said.