The 25-year-old man, from Tyrol, had to be restrained and the Boeing 737 made an emergency landing in Sofia, Bulgaria.
About two hours into the flight the man jumped up and started shouting: "Here are the terrorists, we have a bomb! You’ll all be blown up and die like the people on September 11th!," according to a report in the Kronen Zeitung paper.
The man ran down the aisle, attacking staff who tried to stop him, and causing panic among the 98 passengers on board.
An Israeli air marshal restrained the man and wrestled him to the floor. The pilot then landed the plane at the nearest airport and alerted the police.
The Austrian was arrested by a special unit of Bulgarian police, and shortly after the plane was able to continue its journey to Munich.
The Austrian Embassy has been informed and an investigation is under way in Bulgaria.