Hamilton had a messy session, which ended with the right front brake disc on his W08 shattering on the run up to Turn 3. He will also drop five places on the grid for an unschdueled gearbox change.
Valtteri Bottas was third, with Kimi Raikkonen making it a Ferrari/Mercedes top four, but was over half a second slower than Vettel in the sister SF70-H.
The two Red Bull's then began a sequence of Noah's Ark, Max Verstappen ahead of Daniel Ricciardo, with the two Haas drivers, immediately followed by the Toro Rosso's.
It was Kevin Magnussen who was best of the rest in seventh for Haas, with Romain Grosjean, Danill Kvyat and Carlos Sainz rounding out the top 10.
Vettel on top early on
In the early parts of the final 60 minutes of practice, it was Verstappen and Bottas who set the best times, the Red Bull lapping in 1:06.015s, but the Mercedes lapping about three tenths quicker, with a 1:05.726s.
It was however, Vettel who topped the first half of the session, with a time about four tenths quicker than the best Bottas could manage at the stage.
After the final practice runs had been completed, attention then switched to the low-fuel Qualifying simulations, which would give the best indication of how the grid could form up.
It was Hamilton who clocked the first representative time of this segment of the session, a 1:05.361s taking him to the top of the time sheets, where he remained after Vettel's first attempt was two hundreths of a second slower than the W08.
Aborting his next flying lap, Vettel finally did set the fastest time, the 1:05.092s that would remain unbeaten for the rest of the session.
Late on, approaching Turn 3, Hamilton's brake failed, causing him to limp home back to the pits at a crawl, giving Mercedes a couple of hours to find, fix and replace the brakes.
As expected, the mid-field was closely matched, with just four tenths being the difference between Kvyat in ninth and Fernando Alonso in 15th.
Alonso has reverted to the old spec Honda engine, after a problem in the new spec was detected, while team-mate Stoffel Vandoorne had a good session, clocking the 13th fastest time.
Sainz suffered from an early stoppage in the session, although quick work from the mechanics and marshals enabled him to go ninth.
Jolyon Palmer had a trouble free session, finishing a confidence boosting 14th, with Renualt team-mate Nico Hulkenberg.
Williams, who have brought major upgrades to Austria were down the order, Lance Stroll ahead of Felipe Massa.
Pascal Wehrlein was slowest of all for Sauber, who have struggled for pace all weekend.
|5.||Max Verstappen||Red Bull||+0.692s|
|6.||Daniel Ricciardo||Red Bull||+0.804s|
|9.||Danill Kvyat||Toro Rosso||+1.187s|
|10.||Carlos Sainz Jr||Toro Rosso||+1.192s|
|11.||Esteban Ocon||Force India||+1.282s|
|18.||Sergio Perez||Force India||+1.783s|