Martin Hinteregger put the visitors ahead from a superbly worked corner in the 31st minute and they seemed headed for victory until Walters ran on to a long ball out of defence, out-muscled a defender and fired home with five minutes left.
The goal maintained Ireland's unbeaten home record in nine competitive internationals since Martin O'Neill was appointed coach in late 2013.
The Irish stay second in Group D level on 12 points with leaders Serbia, who drew 1-1 at home to Wales later on Sunday.
Austria, who last played at a World Cup in 1998, remain fourth on eight points with the third-placed Welsh.
Ireland tried to turn the match into a physical scrap but the more refined Austrians struck the first blow.
David Alaba sent a low, outswinging corner into the middle of the penalty area, Sebastian Proedl let it go through his legs and Hinteregger met it first time to score from 12 metres.
Ireland were much more dangerous in the second half as Austria struggled to deal with repeated crosses into the area.
Stefan Lainer nearly put through his own goal but then rescued Austria shortly afterwards by clearing Kevin Long's header off the line.
Austria had two chances to settle the match, when Valentin Lazaro just failed to make contact with a ball across the face of goal and substitute Florian Grillitsch's shot was turned around the post by Darren Randolph.
They paid dearly for those misses when Walters went chasing after a long ball upfield. It initially seemed a lost cause but Aleksandar Dragovic dallied, Walters forced him off the ball and fired past keeper Heinz Lindner from the edge of the area.
Ireland thought they had won when Shane Duffy headed in a loose ball from close range but it was disallowed for a foul.
(Writing by Brian Homewood; Editing by Ken Ferris)
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