"The government has sent the bill to parliament without considering our viewpoint," Mouddar Khouja, founder of Austrian Muslims Initiative, said at a press conference Monday.
"The draft had to be examined during the Austrian Muslims Initiative meeting on Dec. 21."
Khouja said Muslims are considered second class citizens in Austria and the government does not take into account the existing laws on religious freedoms and UN laws on freedom of religion and belief.
According to the bill, employing preachers from abroad would be prohibited. Imams would instead be trained at Austrian universities.
Currently, some 300 imams work in the country, including 65 Turkish preachers.
The proposed legislation also contains a new overseas funding ban.
"This bill is not a security or police law," Khouja said. "About 600,000 Muslims and future generations are concerned."
"It is unacceptable that the government sent the bill to parliament without consulting the Muslim community," Austria Turkish Islamic Union President Fatih Karadas said.
At the press conference, attendees said they collected 200,000 signatures that will be submitted to the parliament, a move backed by many Muslim organizations.
Islam has been an official religion in Austria since 1912. The Islam law, known as Islam Gesetz, was introduced by Austria's last emperor, Franz Josef, after the Austro-Hungarian Empire annexed Bosnia-Herzegovina.