At the end of the war, Otto returned to Europe and lived for several years in France and Spain.

In 1949, he ennobled several people, granting them Austrian noble titles, although not recognized by the Austrian republic. As he did not possess a passport and was effectively stateless, he was given a passport of the Principality of Monaco, thanks to the intervention of Charles de Gaulle in 1946. As a Knight of Malta, the order also issued him a diplomatic passport. Later, he was also issued with a Spanish diplomatic passport.

On 8 May 1956, Otto was recognized as an Austrian citizen by the provincial government of Lower Austria. The Austrian Interior Ministry approved this declaration of citizenship, but on the condition that he accept the name Dr. Otto Habsburg-Lothringen, on 8 February 1957. However, this only entitled him to a passport "valid in every country but Austria". Otto had already submitted a written statement, on 21 February 1958, that he and his family would renounce all privileges to which a member of the House of Habsburg was formerly entitled, but this first declaration did not satisfy the requirements of the Habsburg Law, which stated that Otto and other descendants of Charles could only return to Austria if they renounced all royal claims and accepted the status of private citizens. He officially declared his loyalty to the Republic of Austria on 5 June 1961, but this statement was ruled insufficient as well.

In a declaration dated 31 May 1961, Otto renounced all claims to the Austrian throne and proclaimed himself "a loyal citizen of the republic", "for purely practical reasons". In a 2007 interview on the occasion of his approaching 95th birthday, Otto stated:

This was such an infamy, I'd rather never have signed it. They demanded that I abstain from politics. I would not have dreamed of complying. Once you have tasted the opium of politics, you never get rid of it.

The Austrian administrative court found on 24 May 1963 that Otto's statement was sufficient to meet this requirement. He and his wife were then issued a Certified Proof of Citizenship on 20 July 1965. However, several elements in the country, particularly the Socialists, were ill-disposed to welcoming back the heir of the deposed dynasty. This touched off political infighting and civil unrest that almost precipitated a crisis of state, and later became known as the "Habsburg Crisis". It was only on 1 June 1966, after the People's Party won an outright majority in the national election, that Otto was issued an Austrian passport, and was finally able to visit his home country again on 31 October 1966 for the first time in 48 years. That day, he traveled to Innsbruck to visit the grave of Archduke Eugen of Austria. Later, he visited Vienna on 5 July 1967.