Three wickets in five balls from Michael Clarke saw Australia secure a record-equalling 16th straight Test victory.
India had seemed to have done enough to save the second Test in Sydney, however they fell nine minutes short of the close of play as Clarke struck.
The part-time spinner removed Harbhajan Singh and RP Singh in successive deliveries and although Ishant Sharma survived the hat-trick, he edged his third ball to slip to spark wild celebrations among the Australians.
The collapse was harsh on India captain Anil Kumble, who had dug in valiantly for 45 not out off 111 balls.
Australia captain Ricky Ponting was a relieved man at Clarke's heroics, after he had gambled on reaching 401-7 before declaring earlier in the day.
That left India with a target off 333 - but more importantly it left Australia with at least 72 overs to dismiss the tourists.
However it took Australia just five balls to find the breakthrough with Brett Lee removing Wasim Jaffer for a duck.
Stuart Clark then produced a classy spell as he trapped VVS Laxman leg before and then coaxed Sachin Tendulkar in to chopping onto his own stumps.
Having reached tea at 79-3, India still looked like they would see the match out for a draw.
However, aided by two controversial decisions, Australia ripped through the tourists innings.
Rahul Dravid was the first to feel aggrieved as he was adjudged to have edged Andrew Symonds behind - although replays showed the ball clipped his pad not his bat.
Yuvraj Singh fell for a duck just three balls later to Symonds to leave India on 115-5 before the tourists were left fuming at the umpires again.
Sourav Ganguly, having reached 51, edged a delivery from Lee towards the slips. Clarke pounced low to scoop up the ball and claim the catch - and although the replays were inconclusive the Indian batsman was given out by umpire Mark Benson without even referring the decision.
Despite being on the ropes Mahendra Singh Dhoni and Kumble dug in bravely to frustrate Australia - and put India on course for a draw.
The pair put on 48 in 21 overs before the resistance was broken by man-of-the-match Symonds - the all-rounder trapping Dhoni leg before for 35.
Still India looked to be in control as Kumble stubbornly refused to give in - however that was before Clarke was given the chance to make a name for himself.
Having failed with the bat, Clarke's left-arm spin did the trick as he had Harbhajan caught by Mike Hussey and then trapped RP Singh leg before.
Sharma, having arrived at the crease with two right-handed gloves, saw off the next two deliveries - only to edge the third to Hussey.
That meant Australia equalled their own world record of 16 successive victories set by Steve Waugh's team between 1999 and 2001.
Earlier in the day Hussey had finished on 145 not out to provide the backbone to the Australian total of 401-7, while Symonds added 61.