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The 33-year-old raced at Mugello earlier this year and will return to the team for its home race.
The Red Bull Ring is home for the energy drinks manufacturer and the bike brand.
“I’m ready to go again,” said the Spaniard.
“Mugello was a special circuit to make my return for Red Bull KTM but it also doesn’t get much more special than Red Bull Ring.
“For the track, the place, the fans and the atmosphere and for how much this grand prix means to KTM it also feels a bit like a home race for me.
“I have some good memories of fighting for the win there but, like in Italy, the goal will be to get on the track with the KTM RC16 and continue our testing program.
“We will have work to do but I know the Austrian GP will also be a lot of fun.”
Espargaro missed almost half of the 2023 season with GasGas Racing after suffering a near career-ending crash in the season opener at Portugal.
He returned at Silverstone but stood back from full-time riding in 2024 after being replaced by Moto2 champion Pedro Acosta.
Espargaro lays claim to being the first rider to score a MotoGP podium for KTM.
He finished 14th in the sprint and 17th in the grand prix at Mugello earlier this year.
