Fama - the Austrian association for the film and music industries - made the decision at a specially convened panel on Tuesday.
Described by one reviewer as “High Noon in the high peaks”, the film is directed by Andreas Prochaska, from Vienna, and stars British actor Sam Riley, alongside Austria’s Tobias Moretti.
It’s an alpine revenge drama, set in a remote Austrian mountain village in the late 19th century.
"Part alpine-Western, part Heimatfilm, it’s atmospherically exciting and boasts outstanding performances. The director maintains the tension with a great sense of rhythm and creates a genre film that has attracted international attention," the jury said.
"Prochaska has transferred the classic American genre to the alpine landscape, which combined with the rural drama creates something both believable and fascinating," they added.
The film premiered at the Berlinale film festival, and is based on a bestselling novel by Thomas Willmann.
The Oscar nominations will be announced on January 15th.