Set 391 to win, England resumed at 81-5 and offered little resistance, lasting just 10 overs and less than hour in the opening session, as bustling seamer Ryan Harris ran through the tail to finish with a career-best 6-47 in his fourth Test, dismissing the tourists for 123.
Such a result seemed unfathomable when Australia made just 268 on the first day after being sent in to bat, and even less so when England cruised to 78-0 early on the second day.
However, recalled fast bowler Mitchell Johnson's stunning four wickets in 27 balls on day two as part of his first innings haul of 6-38 turned the series on its head and another century from the rejuvenated Mike Hussey (116) in Australia's second innings sealed England's fate.
Having been beaten by an innings in Adelaide in the second Test, it was Australia's first win in six Tests, when an England victory would have guaranteed the tourists retained the Ashes.
If England did harbour any hope of a record fourth-innings chase it was quickly erased late on day three, when their top five batsmen all went cheaply, including Paul Collingwood falling for 11 on the final ball of the day.
It was just a matter of time on Sunday for the Australians, who were led by Michael Clarke, with captain Ricky Ponting watching from the pavilion with a fractured little finger on his left hand.
Despite the injury, the out-of-form Ponting said he was confident of being fit for what now shapes up as a blockbuster Boxing Day Test at the MCG in Melbourne starting on December 26.
The skipper had no cause for concern as he watched from off the field, with Harris starting the rout by clean bowling night-watchman James Anderson for three, with England losing its last seven wickets for only 39 runs.
Man-of-the-match Johnson picked up 3-44, he and Harris both claiming nine wickets for the Test.
Ponting lauded Australia's first-day batting on a lively wicket, and the performance of Johnson.
"To get 270 on that wicket on the day one was the difference," he said.
"We set the game up on day one and Johnson's spell on day two was probably one of the all-time great Ashes bowling performances.
"You could just see Mitch had that glint in his eye this week."
England captain Andrew Strauss digested his team's first loss of the tour and said it was not time to panic.
"We've got a few things to look at and work on," he said.
"But you need to put it in perspective and we've played a lot of good cricket on this tour so far.
"We have to learn lessons from this and retain the buoyancy and positivity in the dressing room and I am sure we can win in Melbourne if we do that.
"Now is not the time to panic."