Maximilian Tödtling (45) told his parishioners that he would quit in September and asked them to understand why he had chosen to leave.
Tödtling has been in charge of the parish of Leoben-West for eight years, and according to a report in the Kronen Zeitung newspaper is very popular.
By the end of August he will have given up all his church duties and will apply to the Pope for laicization - whereby his status as a member of the clergy will be removed.
Tödtling said that he was in a relationship with a woman called Nora who works for a Catholic charity that takes care of the poor and homeless.
"We didn’t want to have to hide our relationship any more. This step has not been easy for me, but I feel very happy and relieved that we can now live honestly," Tödtling told Austrian broadcaster ORF.
He added that much of his congregation had "positive and nice reactions and I had a lot of support from the diocesan leadership". There had, he said, also been disappointment and criticism, but that "was understandable".
He said that it had taken around four years for him and Nora to decide what the best course of action was, and that ultimately he knew could not stick to his vow of celibacy.
He and Nora hope to get married in church.
The parish will be supervised by a local pastor from Leoben.