It is the first red blue government in the province.
Burgenland governor Hans Niessl of the SPÖ said days of intense negotiation showed there were no obstacles to the two parties joining forces, with FPÖ Burgenland leader Johann Tschürtz adding that there were no differences between the parties.
But Niessl is facing strong criticism from some quarters for entering a coalition with the FPÖ, and breaking with the national party line.
A Facebook initiative calling itself No to Red Blue has gathered over 3,000 supporters, mainly from the Socialist Youth party.
A press conference held by Niessl and Tschürtz on Friday was disrupted by an activist from left-wing group Offensive gegen Rechts who stormed in, shouting that the coalition would not be left in peace and that protests would take place against "the right-wing rabble rousing that has taken over Burgenland".
Austrian chancellor Werner Faymann has categorically ruled out an SPÖ/FPÖ coalition at national level.
Meanwhile the ÖVP leader in Burgenland, Franz Steindl, whose party lost over five percent in last weekend's election has resigned. He will be replaced by Eisenstadt mayor Thomas Steiner.
Austria has seen a rise in support for the FPÖ following local elections in Burgenland and also in the central state of Styria.
Campaigning with anti-immigration slogans such as “Foreign in your own country,” the FPO's following almost tripled in Styria.
Upper Austria and Vienna will hold elections in the autumn, with FPÖ leader Heinz-Christian Strache expected to stand for election in the capital.