Israeli officials have increasingly voiced fears the civil war in Syria could spill over their borders
Tanks and armoured vehicles were used in the fighting at Quneitra, near Israeli-held territory.
Austria has said it will withdraw its peacekeepers from the Golan Heights because of the fighting.
It comes a day after Syrian troops backed by Lebanese Hezbollah militants retook the key town of Qusair.
The involvement of Hezbollah and the upsurge of fighting near the ceasefire line with Israel in the Golan have both raised fears that the conflict could spread across Syria's borders.
Analysis
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Quneitra is close to the dis-engagement line with Israel on the Golan Heights and is a crossing point for local - mainly Druze - inhabitants, many of whose families straddle the de-facto border. Clik here to view.
There has been sporadic fighting in the Golan over recent months with many Syrian army units having been pulled out to battle the rebels elsewhere.
On occasion, Israeli positions have come under fire and the Israeli army has fired back. Israel, while anxious not to get involved, remains deeply concerned about what is going on in and around Quneitra.
It fears a rebel success could open up its Golan border to attack from jihadist elements. This is just one more front where the violence in Syria threatens to spill over - drawing in Syria's neighbours.
Rebels seized the crossing near the town of Quneitra earlier on Thursday, with explosions and heavy shelling rocking the area.
But an Israeli military source said Syrian regime forces retook the symbolically significant crossing hours later and that it was now relatively quiet in the area.
Austria said UN peacekeepers had withdrawn to safety as fighting raged around the crossing and the town of Quneitra.
The government said it would now pull its contingent of troops out completely because of safety concerns.
Austrian troops make up more than a third of the more than 900 strong UN force monitoring the demilitarised zone and Qusair, which is the only open crossing between Syria and the Israeli-controlled area of the Golan Heights.
Israeli fears
Syria's deployment of tanks in the demilitarised zone violates ceasefire agreements in place since the Arab-Israeli war of 1973, but sources have told the BBC that Israel will not react.
Israel captured part of the plateau in 1967 and later annexed it in a move that has never been internationally recognised.
Israeli officials have voiced fears the civil war in Syria could spill over their borders. They are worried the Golan Heights could be used to launch attacks against Israel - either by Islamist extremists fighting for the rebels, or by Hezbollah militants fighting on the government side.
UN mission in the Golan Heights
- UN peacekeeping troops have been in the demilitarised zone of the disputed Golan Heights, between Syria and Israel, since the armistice following the 1973 War
- Austrian soldiers have been part of the mission, known as the UN Disengagement Observer Force (Undof), from its beginning in 1974
- Undof had 913 troops as of 30 April 2013, more than a third of them Austrian
- Canada, Croatia and Japan had already withdrawn their contingents, leaving just India and the Philippines as contributors to the mission
Hezbollah's growing role in the conflict was highlighted by its involvement in the battle for Qusair, which government forces recaptured on Wednesday after a bitter siege.
Hezbollah - or the Party of God - is a political and military organisation in Lebanon made up mainly of Shia Muslims.
It emerged with financial backing from Iran in the early 1980s when it fought Israeli forces in southern Lebanon and has always been a close ally of Syrian President Bashar al-Assad.
Its involvement in Syria has heightened sectarian tensions across the region, and the US has called for it to withdraw.
Late on Wednesday several rockets landed in the Hezbollah stronghold of Baalbek inside Lebanon - after rebel threats to strike at Hezbollah on its home turf.
Ghost town
Qusair lies only 10km (6 miles) from the Lebanese border and is close to important supply routes for both the government and rebels.
A BBC team who were the first Western journalists to reach it after the fighting found it in ruins and deserted but for Syrian and Hezbollah troops.
One of the Hezbollah fighters told The Times newspaper it had dispatched some 1,200 special forces fighters to spearhead the assault on Qusair.
Lyse Doucet: "[The rebels] say they're coming back but they'll come back to a city that's gone"
This battle for Qusair is over. But now the fight begins to help the people who survived.
Thousands fled the violence; many were trapped inside. Aid agencies speak of alarming reports that large numbers of wounded need urgent care.
There's not enough food or water in Qusair or for those displaced outside in schools, shelters and on the streets. In the last two days, the UN managed to send in a powerful generator to help restart the main pumping station for this entire region.
But now aid agencies are urging the government to give them greater access to the city. The fight for Qusair was a strategic victory, but a humanitarian disaster.
"The buildings were so close, we were clearing them not metre by metre but centimetre by centimetre," said the veteran fighter, who went by the nom-de-guerre Haji Abbas and said he had recently returned from a week's fighting in the town.
"We squashed them into the northern part of the town and then pinned them down with sniper fire."
A large number of rebels had died and many others had surrendered as troops advanced swiftly, Syrian TV reported.
The rebels said they withdrew overnight in the face of a massive assault.
As the battle for Qusair raged, fighting was continuing in most other parts of Syria, especially around the capital Damascus, where regime forces are trying to push the rebels back from the suburbs, says the BBC's Jim Muir in Beirut.
More than 80,000 people have been killed in Syria and more than 1.5 million have fled the country since an uprising against President Assad began in 2011, according to UN estimates.
International efforts to resolve Syria's conflict continue, but the US and Russia have failed to set a date for proposed peace talks.
The UN and Arab League envoy to Syria, Lakhdar Brahimi, said the international conference might now be held in July, rather than June as had been planned.
He called the lack of agreement between Washington and Moscow "embarrassing", but also noted that neither side in the Syrian conflict was ready to commit to attending.
Meanwhile France has said that growing proof of chemical weapons use in Syria "obliges the international community to act".
However, President Francois Hollande cautioned: "We can only act within the framework of international law."
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