The Österreichring, situated in the Styrian hills at altitude, strongly favoured turbocharged engines, making it a natural hunting ground for Renault. The race was the thirteenth Austrian Grand Prix and the eleventh held at the circuit. Heading into the event Jones led the drivers' championship with 41 points, eleven ahead of Nelson Piquet and seventeen ahead of Carlos Reutemann, his Williams team-mate. Williams also led the constructors' championship by 26 points over Ligier.
West German driver Jochen Mass crashed and rolled his Arrows A3 during practice, injuring himself and failing to make the start. Team Lotus entered a third car for Nigel Mansell, making his Formula One World Championship debut.
The altitude conditions suited the Renault turbos perfectly. René Arnoux claimed pole position with a time of 1:30.27, with Jabouille alongside him at 1:31.48. Jones qualified third in his Williams FW07B at 1:32.95, Reutemann fourth at 1:33.07, Jacques Laffite fifth for Ligier, and Didier Pironi sixth in the second Ligier. Nelson Piquet was seventh for Brabham. Alain Prost qualified twelfth for McLaren, Gilles Villeneuve fifteenth for Ferrari, and Mansell twenty-fourth.
Jones made a strong start from third on the grid and led through the opening laps. Arnoux moved ahead on lap 3 and built a commanding advantage. With Arnoux pitting for tyres on lap 21, Jabouille inherited the lead. Jones closed steadily over the final stint and came within striking distance, but Jabouille survived on severely worn tyres to take the chequered flag by 0.82 seconds. It was Jabouille's first points finish since his victory at the 1979 French Grand Prix — over a year earlier — and would also prove to be the last points finish of his career.
Reutemann was third, 19.36 seconds behind Jones, giving Williams both second and third on a day when the championship picture shifted very little. Laffite was fourth, Piquet fifth, and Elio de Angelis sixth in the Lotus to complete the points-scoring positions. Prost drove from twelfth on the grid to finish seventh, and Villeneuve was eighth. Arnoux recovered to ninth — one lap down — after his tyre stop cost him the lead. Arnoux also set the fastest lap on lap 50 with a time of 1:32.53.
Mansell's debut ended on lap 40 with a broken engine. He additionally suffered burns during the race after his overalls were soaked in fuel in a pre-race incident, making his debut one of the more dramatic in the sport's history. John Watson retired the second McLaren on lap 34 with engine failure, Mario Andretti went out on lap 6, and Bruno Giacomelli's Alfa Romeo retired on lap 28 with a wheel problem. Pironi retired around lap 25 with handling issues, and Jean-Pierre Jarier's Tyrrell also retired with electrical problems.
After the race, Jones led the drivers' championship with 47 points, ahead of Piquet on 36, Reutemann on 30, and Laffite on 28. In the constructors' championship, Williams led Ligier by 26 points with 77 to 51, and Brabham third on 36. Jones went on to win the 1980 World Drivers' Championship, with Williams claiming the constructors' title.