The 28-year-old Spaniard, the 2024 MotoGP champion, clocked a lap of 1:27.917 in the closing minutes of Q2 at the Red Bull Ring in Spielberg to secure his third pole position of the season, edging Marquez by just 0.015 seconds.
Martin will be joined on Sunday's front row by Marquez and KTM's Pedro Acosta, racing at the Austrian manufacturer's home circuit.
"I was behind Marc at first," Martin said. "Even though I was fast, I couldn't ride the way I wanted to or brake strong. So I decided to go on my own and avoid the risk of yellow flags. I pushed like crazy. Everything was under control, but definitely on the limit, so I'm really happy.
"It seems like we made a big step from yesterday. I was fast this morning and again in qualifying, so I'm feeling prepared for the race. Marc and Pedro look great as well, so it will be an intense race."
Marquez seized the championship lead for the first time this season by winning a chaotic San Marino Grand Prix last weekend.
The victory left the 33-year-old Spaniard level with Martin on 274 points but the Ducati rider moved to the top of the standings by virtue of having won more races this season.
Martin responded emphatically on Saturday, delivering a blistering lap to deny Marquez pole position.
Marquez was upbeat about the outcome though, saying: "Yesterday we were struggling a lot in the time attack, so today we improved. I knew it would be difficult to make the front row but we're here now, so I'm happy.
"We know that here it changes a lot between the new tyre and used tyre. The sprint race (later on Saturday) will be one thing but the main race is another, and starting on the front row is always important."
Aprilia's Marco Bezzecchi, third in the championship standings, qualified fourth, while Trackhouse Aprilia rider Ai Ogura completed the top five.