The flag traces back to the coat of arms of the medieval Babenberg dynasty, a silver band on a red field (in heraldry: Gules a fess Argent).

The origin of the Bindenschild has not been conclusively established; it possibly derived from the Styrian margraves of the Otakar noble family, who themselves may have adopted the colours from the descendants of the Carinthian duke Adalbero (ruled 1011–1035), a scion of the House of Eppenstein extinct in 1122.

According to the 18th-century historian Chrysostomus Hanthaler, his grandson Duke Frederick II of Austria (1230–1246), nicknamed the "Quarrelsome" or the "Warlike", the last of the Babenberg dynasty, designed a new coat of arms in red-white-red after his accession—an attempt to prevail against reluctant local nobles and to stress his autonomy towards Emperor Frederick II.

The medieval chronicler Jans der Enikel reports that the duke appeared in a red-white-red ceremonial dress at his 1232 accolade in the Vienna Schottenstift.

After the dynasty had become extinct with Frederick's death at the 1246 Battle of the Leitha River, they were adopted by his Přemyslid successor King Ottokar II of Bohemia.

[citation needed] In fact, the war flag of the Holy Roman Empire during the Crusades was a silver cross on a red field quite similar to the later Austrian arms.