David E Duke, who was once a KKK Grand Wizard, runs a business selling photographs of rare birds and other wildlife in a village near Salzburg.
The discovery has outraged his neighbours in Austria which has struggled to shake off the scourge of a new wave of far right politicians.
Mr Duke, who has previously denied Adolf Hitler used gas chambers in the holocaust, has rented a house by the Zeller lake near the city.
Local Green Party politician Karl Oellinger said Mr Duke roamed the Austrian Alps taking snaps of birds and wildlife and selling them on the internet.
"He's registered as living in Salzburg and although I can't check official files I have it on good information he has lived there for four or five years," he said.
"The Austrian police have known he's been here all along. Apparently he can live here unchallenged as he travels to other countries to help the far-right movement."
Mr Duke was recently deported from the neighbouring Czech Republic after promoting one of his books in Prague.
But Government officials have said he is free to stay in Austria as long as he does not break any local laws.
Alexander Marakovits, Interior Minister spokesman, said: "As a US citizen he can, as a tourist, stay three months at a time without a visa. And currently there is no evidence of criminal acts."
Mr Duke said he lived a quiet life in Austria: "I'm not in Austria for any political activities. I just come to Austria to relax - the mountains are beautiful. The Austrian Alps are just beautiful. There's beauty all over the world.
"I'm a writer, photographer, a speaker, I do all sorts of things."
British historian David Irving was jailed in Austria for almost a year for "glorifying and identifying with the German Nazi Party" under the Verbotsgesetz law in 2006.