Talisman Alexis Sanchez, influential playmaker Jorge Valdivia and lively winger Jean Beausejour did the damage for a side considered by many to be dark horses to go all the way in Brazil.
Tim Cahill did pull one back for the Socceroos, offering their young side hope, but they now have it all to do in a group which also includes reigning world champions Spain and the side that hammered them 5-1 in the group’s other fixture on Friday - Holland.
It took just 12 minutes for Chile to break the deadlock in Cuiaba, with confusion in the Australian penalty area seeing them fail to clear their lines and present Sanchez with an opportunity to prod past Matthew Ryan from close range.
A second arrived just two minutes later, with Sanchez squaring for an unmarked Valdivia to pick his spot from just inside the box.
Chile were in complete control at that stage, but a trademark back post header on 35 minutes from Cahill – his country’s all-time leading goalscorer – offered Australia a lifeline and opened the game up as a contest.
The action flowed from end-to-end after the interval, with Cahill, Mark Bresciano and Eduardo Vargas all going close.
It was, however, in the second minute of stoppage-time that the result was finally put beyond doubt, with Wigan Athletic winger Beausejour rifling low into the bottom corner from 20 yards out.
Spain's surprise hammering earlier in the day potentially opened up a route through the group for the highly rated Chileans, and they began as if it was all too easy.
Australia, by contrast, were ragged and cut open with regularity in the early stages. Their goal was breached for the first time in the 12th minute.
Challenges were few and far between as Sanchez found Charles Aranguiz and he was allowed to cross for Eduardo Vargas.
Vargas failed to make clean contact with his header but Australia failed to clear and Sanchez calmly picked his spot and lashed home from six yards.
Chile doubled their lead less than two minutes later as they powerfully swept forward once again.
Sanchez brilliantly turned Mile Jedinak and raced into space as Vargas drew the defence with a well-timed run.
He picked out Valdivia on the edge of the box and the finish, into the roof of the net, was clinical.
The game seemed beyond Australia at that early stage and Chile looked likely to increase their lead as they maintained their tempo for much of the opening half-hour.
But Australia gradually began to settle and Cahill dragged them back into the game.
Chile captain and goalkeeper Claudio Bravo invited pressure with a poor clearance. His defence did appear to repel any threat but Ivan Franjic won the ball back for Australia, exchanged passes with Mathew Leckie and whipped in a dangerous cross into the area.
Former Everton star Cahill timed his leap perfectly to plant a firm header past Bravo.
The game then opened up considerably.
Mauricio Isla was released by a fine pass from Vidal but was denied by a superb challenge from Jason Davidson.
Early in the second half Cahill headed past Bravo once again, from a Leckie, cross only to be frustrated by an offside flag.
Bravo produced a brilliant save to keep out a powerful first-time shot from Mark Bresciano from a Davidson cross.
Play switched quickly to the other end where Alex Wilkinson cleared off the line after Vargas dinked the ball over Maty Ryan from another defence-splitting Sanchez pass.
Bresciano continued to get forward from midfield in search of an equaliser and fired wide. Cahill's presence in advanced positions also gave Chile continuing problems.
Cahill appealed for a penalty after going down in a challenge from Gonzalo Jara with two minutes remaining but nothing was given.
The task proved beyond the Socceroos and substitute Beausejour wrapped up the scoring after Ryan saved from Mauricio Pinilla.