Seamers Peter Siddle and Stuart Clark sliced through the England batting order to dismiss the hosts for 102, their lowest total in an Ashes Test at Headingley for 100 years.
Shane Watson and Ricky Ponting shared a quickfire second-wicket partnership of 119 and the touring side ended the day on 196 for four, a lead of 94 runs as they bid to level the series.
Michael Clarke was unbeaten on 34 at the close with Marcus North on seven.
England's day started badly when all-rounder Andrew Flintoff was ruled out through injury but their captain Andrew Strauss won the toss.
He survived a huge shout for lbw to the first ball of the match but lasted only 17 balls and scored three runs before edging Siddle to third slip where North took a brilliant one-handed catch.
Ravi Bopara made one before he tamely prodded Ben Hilfenhaus to Michael Hussey at gully and Ian Bell, on eight, failed to avoid a short ball from Mitchell Johnson and gave wicketkeeper Brad Haddin a simple catch.
Paul Collingwood edged a vintage Clark outswinger straight to Ponting at second slip for a duck and Alastair Cook's resistance ended on 30 when he edged Clark to Clarke at first slip.
Stuart Broad was caught at short mid-wicket by Simon Katich off Clark for three to leave England reeling on 72 for six at lunch.
The procession continued in the afternoon as Graeme Swann, Steve Harmison, James Anderson and Graham Onions fell in quick succession to Siddle, who finished with test-best figures of five for 21. Clark took three for 18.
Watson smashed the first two balls of Australia's innings for four but the touring side lost Katich for nought when he fended a rising Harmison delivery to Bopara at leg gully.
Ponting batted aggressively from the start, pulling Onions's first ball for six and taking 17 off his opening over.
Ponting and Watson completed the first 50 partnership of the match off only 69 deliveries.
Earlier, England’s preparations were beset by a series of problems on Friday morning after Flintoff was ruled out and wicketkeeper Matt Prior suffered a back spasm playing soccer on the Headingley outfield. The hosts then asked for the toss to be delayed for 10 minutes. Fortunately, Prior responded to treatment and was named in the side, while Flintoff was replaced by Steve Harmison.
SCORE BOARD
ENGLAND (I Innings)
Strauss c North b Siddle 3
Cook c Clarke b Clark 30
Bopara c Hussey b Hilfenhaus 1
Bell c Haddin b Johnson 8
Collingwood c Ponting b Clark 0
Prior (not out) 37
Broad c Katich b Clark 3
Swann c Clarke b Siddle 0
Harmison c Haddin b Siddle 0
Anderson c Haddin b Siddle 3
Onions c Katich b Siddle 0
Extras (B-5, LB-8, W-1, NB-3) 17
Total (all out, 33.5 overs) 102
Fall of wickets: 1-11, 2-16, 3-39, 4-42, 5-63, 6-72, 7-92, 8-98, 9-102.
Bowling: Hilfenhaus 7-0-20-1, Siddle 9.5-0-21-5, Johnson 7-0-30-1, Clark 10-4-18-3.
Australia (I Innings)
Watson lbw Onions 51
Katich c Bopara b Harmison 0
Ponting lbw Broad 78
Hussey lbw Broad 10
Clarke (batting) 34
North (batting) 7
Extras (B-9, lb-3, W-2, nb-2) 16
Total (for 4 wkts, 47 overs) 196
Fall of wickets: 1-14, 2-133, 3-140, 4-151.
Bowling: James Anderson 12-2-55-0; Steve Harmison 13-3-55-1, Graham Onions 11-2-45-1, Stuart Broad 11-4-29-2.
