Michael Clarke's team had the tourists reeling at 94 for eight at tea in reply to their first innings 295 after a spectacular collapse in the middle session.
England lost six wickets for 39 runs after going into lunch at 55 for two.
Left-armer Mitchell Johnson was the destroyer with his hostile pace snaring four for 46, while Ryan Harris and Nathan Lyon each grabbed two wickets.
At the interval, England trailed Australia by 201 runs with only two wickets left in a stunning reversal of fortunes after Australia had struggled on the opening day.
The wicket of Kevin Pietersen for 18 triggered the collapse for England who seemed unable to stem the tide against a fired-up home attack.
Pietersen, playing his 100th Test, was dropped on eight in a sharp caught and bowled chance by Peter Siddle in the 25th over.
England were pinned down for 13 dot balls before Pietersen lost concentration and flicked Harris off his pads to mid-wicket where debutant George Bailey accepted a fine catch.
Johnson struck again three overs later when he set up Michael Carberry with some short deliveries before getting him to edge to Shane Watson at second slip for 40 off 113 balls.
Steve Smith took a bat-pad catch to dismiss Bell, the man of the last series in England, and took a magnificent sprawling catch again next ball to send Matt Prior on his way after a DRS review for a duck.
