Nico Rosberg had also posted the fastest time in the second practice on Friday.
Lewis Hamilton was fifth fastest after crashing with just four laps on the board.
Lewis Hamilton has bounced back from a difficult start to the season with four wins from the last five races.
Nico Rosberg joined Mercedes from Williams in 2010 and has won 19 grands prix for the team, including five this year.
Nico Rosberg said not even the usual team analysis of last year's race at the Hungaroring would do much good.
The German driver was relegated from second to third, having completed the race, after a radio dialogue with the team.
Hungary also offers misfiring McLaren the chance of a strong result at a circuit that has been good to them in the past.
Red Bull would oppose the introduction of a proposed 'halo' cockpit protection device in Formula One next season
Nico Rosberg has his lead in the driver's championship reduced to just one point after the British Grand Prix.
After starting 11th in wet conditions, Sebastian Vettel was the first driver to switch to slick tyres
Race stewards imposed a 10-second penalty on Nico Rosberg for receiving help from his team via radio transmissions.
The triple Formula One world champion's fourth home win, from pole position, was the 47th victory of Hamilton's career.
Mercedes team boss Toto Wolff has warned of stiff penalties for whoever is to blame for further collisions.
Marcus Ericsson needed to pass the medical after crashing heavily in Saturday's final practice at Silverstone.
Lewis Hamilton is chasing Nico Rosberg by a small margin of 11 points in the season championship race.
Lewis Hamilton delivered, going even faster as he headed for the line. Nico Rosberg could not get near him.
Lewis Hamilton will be chasing his fourth win and third home success in a row to cut Nico Rosberg's championship lead of 11 points.
Lewis Hamilton wound up 0.063 seconds better than Nico Rosberg, who missed the entire second Friday session.
Jenson Button's future at Honda-powered McLaren, who have not won a race since his last victory in 2012, is up in the air beyond this year.
Hamilton and Rosberg have now collided for the second time, following a similar incident on the first lap at the Spanish Grand Prix.
Sebastian Vettel had been leading the race when the tyre exploded on the pit straight on the 27th of the 71 laps.
Lewis Hamilton was jeered after he won in Spielberg last Sunday following a last-lap collision with team mate Nico Rosberg.
Niki Lauda also dismissed Lewis Hamilton’s claims that he had buried the hatchet with teammate Nico Rosberg
Storm Queens were looking for their first win of the season but Fire Birds held on to share the spoils as the game tied at 14-14
Mercedes have let their drivers race freely but Toto Wolf warned on Sunday that might have to change.
Lewis Hamilton said real racing was the reason why fans were so passionate about the sport.
On Sunday, the pair collided on the last lap as Lewis Hamilton tried to seize the lead by going around the outside of the German.
Lewis Hamilton's Austrian GP win is his third win of the season and also the first race he won from pole.
Force India's Nico Hulkenberg joined Lewis Hamilton on front row although he was under investigation by stewards. Jenson Button finished third.
Lewis Hamilton has criticised moves to introduce a 'halo' cockpit head protection system next season.
Nico Rosberg will get a five-place grid penalty after damaging his Mercedes gearbox in final practice of Austrian Grand Prix.
Nico Rosberg topped Lewis Hamilton by .357 seconds to be fastest in first practice at Austrian Grand Prix.
Toto Wolff told that the sport is making more money than ever and all teams should be guaranteed a basic amount.
Sergio Perez was a member of Ferrari's driver academy before his Formula One debut in 2011 with Ferrari-powered Sauber.
Nico Rosberg dominated in Azerbaijan, leading all the way from pole position and also setting the fastest lap.
Eight of the 11 teams have factories in England, including champions Mercedes and Renault.