David Irving was pulled over by police while driving in the Southern Austrian province of Styria.
He was taken into custody on the basis of an arrest warrant issued in Vienna in 1989 when he allegedly gave a speech denying the existence of the gas chambers used by the Nazis to murder millions of Jews and others during the Holocaust.
Austria has tough laws against denial of the Holocaust and revival of Nazism. A spokesman for the public prosecutors office said Irving could face 20 years in jail if found guilty.
The right-wing historian was apparently on his way to a students' club in Vienna when he was stopped, Austria's APA agency said. Such clubs are often linked to far-right or pan-Germanic movements.
The 67-year-old British born historian has been active in far right circles since the 1960's, gaining worldwide notoreity for attempting to establish, despite overwhelming evidence to the contrary, that Adolf Hitler was not party to the Holocaust, that there were no gas chambers in Auschwitz, and that the number of Jews killed by the Nazis was wildly exaggerated.
He made his name with a book about the Allied air raids on Dresden and biographies of General Erwin Rommel and the Nazi deputy leader Rudolph Hess. In "Hitler's War," he claimed the Nazi dictator did not know about the mass killings until 1943.
Five years ago he was involved in a high profile court case in which he sued the American Author Deborah Lipstadt for accusing him of Holocaust denial. He lost the case.
This is the second time Austrian police have arrested David Irving.
On the first occasion in 1984 he was deported to Germany. For now he is likely to remain in investigative custody for at least a week while prosecutors investigate whether they can proceed on an arrest warrant served so many years after the alleged offense was committed.
He has been condemned by the courts several times, notably in Britain and Germany, where denying the Holocaust is a crime, and last year he was refused entry to New Zealand.
He is reportedly also banned from residing in Australia, Canada, Italy and South Africa as well as Germany.