The far-right party had warned earlier in the day that it would resign from the government if Chancellor Sebastian Kurz moved to sack the interior minister.
Ministers from Austria's far-right Freedom Party (FPO) resigned en masse on Monday in the wake of a scandal involving party leader Heinz-Christian Strache.
The FPO, the junior partner in Austria's ruling coalition, had warned earlier in the day that it would do so if Chancellor Sebastian Kurz moved to have the FPO Interior Minister Herbert Kickl sacked.
The party is at the head of ministries including Sport, Interior, Labour, Defense and Transport.
The country's political crisis was triggered on Friday when German media released a video showing Strache appearing to offer public contracts to a woman posing as a Russian oligarch's niece. Strache subsequently resigned on Saturday and Kurz, from the People's Party, announced that the country would hold snap elections in September.
He also lambasted his coalition partner for damaging the country's reputation and said Kickl should not lead the investigation into whether criminal charges ought to be brought against Strache.