Police spotted the 42-year-old man in the company of two other Iraqi men Thursday at the train station in Traiskirchen, some 10 kilometres south of Vienna, Austrian broadcaster ORF reported.
When the police tried to do a routine identity check, the men admitted they had flown to Austria with fake passports that their helper then confiscated and that they were seeking asylum, ORF said, citing an interior ministry spokesman Karl-Heinz Grundboeck.
One of the men later told Austrian police he was a nephew of Saddam Hussein, Grundboeck said, adding that the man`s request for asylum was being examined.
The daily Kronen Zeitung named the alleged nephew as Bashar N who has been on a wanted list since 2006.
All three men were interrogated and fingerprinted by police, and the alleged nephew has been brought to a secret place as a protective measure, ORF said as quoted by AFP.
Kronen Zeitung said an international warrant was out for the man`s arrest amid long-standing efforts by the Iraqi authorities to bring the relatives of Saddam Hussein to justice.
A spokesman for the interior ministry could not be immediately reached on Friday.