At a time of rising unemployment and strained labor market policy budgets, Work Integration Social Enterprises (WISEs) are currently facing difficult circumstances in Austria. If, and how, WISEs can continue to create and deliver quality services for their users (while meeting public authority’s demands) is a topic of vigorous debate at the national level. In an endeavor to gain insight into the current situation, the focus of this paper is to explain the historical emergence of WISEs in the context of the Austrian welfare state. The analysis combines empirical data on key characteristics of ECO-WISEs – a major subgroup of WISEs with an ecological orientation – with an analysis of the institutionalization process of these WISEs, based on the outcome of a series of semi-structured interviews with key experts in the field. The discussion begins by describing their development in the 1980s, growth in the 1990s and concludes with the marketization and reorientation process experienced by these WISEs from 2000 onwards. The paper concludes with a discussion of the victories and challenges faced by these WISEs and highlights the important role that ECO-WISEs have assumed in recognizing and responding to societal needs, developing innovative services, and in meeting the requirements of policy makers.