European nations face a paradox. On the one hand, anti-terrorism and security concerns push them to compromise the religious liberties of Muslims and to restrict the practice of Islam in public space. On the other hand, these countries seek to regulate, institutionalise and give representation to (i.e. ‘Europeanise’) Islam, and to facilitate the socioeconomic integration of Muslim minorities. At the same time, the public visibility of Islam has rekindled discussions concerning the nature and content of European secularism, unintentionally giving rise to secular populist movements and Islamophobia. Using Austria as a case study, this paper frames this paradoxical development within its oft-neglected historical legal context. Particularly, it reviews how the country’s history and its legacy have shaped the inclusionary model of religious governance in Austria and Muslim associative life. It then examines how the integration of Muslims in Austria has been challenged by the exclusionary model of citizenship, Islamophobia, xenophobia and discrimination. Finally, it describes the securitisation and recent policy changes towards Islam and Muslims and how these deviate from the historical legal context, compromising the religious liberties of Muslims and restricting Islam from public space.