GRAZ, Austria (AP) _ A court acquitted a 66-year-old man Friday who had walked through the streets of Graz cursing Jews and raising his arm in the Nazi salute.

Witnesses said Rudolf Hofer had shouted anti-Semitic remarks, the Austria Press Agency reported. It said the incident occurred this summer but did not give a date.

Hofer also said, ''I am going to finish off all Jews with my 10-man unit and two hand grenades,'' witnesses testified, and was challenged by two passersby who called a policeman.

According to the news agency report, the judge said a law against anti- Semitic incitement did not apply because few people were present at the time. The prosecutor appealed.

An Austrian soldier was fined two months ago for making anti-Semitic remarks in a bar.

When the Nazis ruled Germany, and Austria after March 1938, people raised their right arms in schools and at rallies and other public events, shouting ''Heil Hitler 3/8''