"Australia's National Selection Panel have opted for the shock selection of Queenslander Joe Burns to join the 13-man squad for the Boxing Day Test," a release by Cricket Australia said.
Burns, 25, has come in as a batsman to replace Marsh, while coach Darren Lehmann said he was "confident" David Warner's injured thumb would be fine.
"Joe Burns can bat anywhere from one to six. There's some flexibility there," Lehmann said.
"It took a fair while to sink in. I'm over the moon at the news as it is the best Christmas present I could ever hope for. I'll get sorted before the game tonight and then see what I have to do tomorrow but I'm just so happy," Burns said.
Marsh has played Australia's last four Tests but has been hampered by hamstring problems over the past two years.
Australia lead 2-0 in the four-match series.
Australia's squad for the third Test: Steve Smith (capt), David Warner, Chris Rogers, Shane Watson, Shaun Marsh, Joe Burns, Brad Haddin, Mitchell Johnson, Mitchell Starc, Nathan Lyon, Josh Hazlewood, Ryan Harris, Peter Siddle.
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