Australia was 110-2 at stumps on the third day of the second Test at the MCG, with a lead of 154 runs, after earlier dismissing South Africa for 311.
The Proteas were 169-2 at the start of the day's play, but failed to consolidate on their good start, losing three wickets in the morning session and five after lunch to finish 44 runs short of Australia's first innings total of 355.
Herschelle Gibbs top-scored for South Africa with 94, including 15 fours, but his quest for a century was cut short when Andrew Symonds got one to nip back off the pitch and go on to dislodge the bails.
Test debutant Phil Jaques was the first man out for Australia - trapped leg before by Andre Nel for 28 - and he was followed later by skipper Ricky Ponting (11), who was also out lbw, this time off the bowling of Shaun Pollock.
Matthew Hayden (45) and local hero Brad Hodge (17) are the not out batsmen overnight.
Nel has carried over his good form with the ball from the first innings and has figures of 1-31 from 10 overs at the close of play, but those numbers would have looked better if he had held a sharp return catch from Hayden when he was on 27. Pollock finished with figures of 1-29 from 11 overs.
Symonds - who bowled well, but without luck on Tuesday - was the chief destroyer for Australia after lunch with an inspired spell that saw him take the wickets of Mark Boucher (lbw for 23), Gibbs and Pollock (lbw for nine) for just seven runs off 16 balls.
Symonds claimed figures of 3-50 from 20 overs with six maidens, while Brett Lee (3-92 off 28 overs) and Shane Warne (2-62 off 21 overs) also bowled well.
The South African batsmen made a slow start to proceedings - scoring at under a run an over - due to some quality pace bowling from opening bowlers Glenn McGrath and Lee.
A fired-up Lee bowled with venom and struck several batsmen throughout the South African innings, with Jacques Kallis dismissed by a fearsome one-two punch in the 10th over of the day.
Kallis unsuccessfully attempted to hook a Lee thunderbolt and was struck flush on the helmet. The shaken batsman just barely avoided stepping on his stumps, but it mattered little as he was dismissed next ball when he played all around a Lee yorker that sent the bails flying.
