Police said they took a man into custody in the town of Tulln, about 15 miles west of Vienna. Federal police said they were treating the suspect as a possible accomplice of a Bosnian who was arrested Monday after he tried to enter the embassy with a backpack containing explosives and nails.
The Bosnian was arrested after his bag set off a metal detector and the man fled on foot, authorities said.
Police sealed off the neighborhood as a precaution and shut down or rerouted nearby bus and tram lines. Officers patrolled the area with bomb-sniffing dogs.
The suspect was described only as a 42-year-old native of Bosnia-Herzegovina who now lives in the province of Lower Austria, which encircles most of the capital. Police said they made the arrest a short distance from the embassy in a neighborhood where security is tight.
The motive for the attack was not immediately clear. Vienna police spokeswoman Michaela Raz said explosives experts were examining the contents of the backpack.
Rather than blow up the backpack in a controlled explosion, a police bomb squad used a water cannon to partially tear it open so the contents could be preserved and examined, officials said.
"There were a lot of nails in that bag. Had it exploded, it would have had an enormous shrapnel effect," said Doris Edelbacher, of Austria's federal counterterrorism office. She said the bag also contained at least two hand grenades.
Munitions experts were still trying to determine whether the device had been properly rigged to explode.
Edelbacher said the backpack also held a book that appeared to contain references to Islam. But she said the content was still being analyzed and it was too early to suggest that the suspect may have been motivated by radical Islamic ideology.
Guenther Ahmed Rusznak, a spokesman for Vienna's Islamic community, issued a statement late Monday condemning the attempted bombing and rejecting radical Islam.
The suspect spoke broken German and appeared to ramble during an initial interrogation, Edelbacher said.
It was unclear how far he made it into the embassy. Public broadcaster ORF, citing unidentified officials, reported that a metal detector sounded an alarm as the man was passing through security checks and that he fled immediately.
Embassy officials could not immediately be reached for comment.
Last month, authorities arrested three people - all Austrian citizens of Arab origin in their 20s - in connection with a video posted online in March that had threatened Austria and Germany with attacks if they did not withdraw their military personnel from Afghanistan.
One of the suspects was released several days later for lack of evidence.
On Friday, the Interior Ministry said it found a list of politicians circulating online as potential targets for attacks. The individuals were notified, but authorities said there were no indications that any of them were ever in danger.