Alexis Sanchez put Chile ahead from close range after 12 minutes and two minutes later Jorge Valdivia made it 2-0 with a well-struck shot as the South Americans looked in control. (Agencies)
Australia fought back strongly, though, and Tim Cahill replied with a trademark header after 35 minutes and thought he had equalised with another early in the second half only to have it ruled offside by an excellent linesman's decision.
Both sides went close in an end-to-end second half before Jean Beausejour grabbed a third for Chile in stoppage time, and they will now have to try to get something from games against Spain or the Netherlands, who thrashed the holders 5-1 earlier in the day.
Amidst the 40,000 spectators at Cuiaba's brand new Pantanal arena, dominated by Chile's "Red Tide" of fans, the South Americans looked to be coasting to a comfortable victory when Sanchez and Valdivia scored in quick succession.
"The ambience really helped the team establish its authority to go after those goals at the beginning," Chile's Argentine coach Jorge Sampaoli told reporters.
CHILE WILL 'CORRECT THINGS'
Charles Aranguiz neatly kept the ball in play on the right with defenders scrambling to block him and he chipped into the middle where Eduardo Vargas and Mile Jedinak jostled for the header, the ball falling for goalscoring talisman Sanchez to poke home.
Chile were quickly two up, carving through Australia's defence before Sanchez squared for Valdivia to rifle into the roof of the net from the edge of the box.
A heavy defeat looked on the cards for the Socceroos but Chile sat back and allowed them to settle.
Australia's record goalscorer Cahill got above Gary Medel to head powerfully home and the striker was denied again moments later when his low strike was saved by Claudio Bravo.
The lowest-ranked team of the 32 in Brazil began the second half strongly with Cahill's bullet header ruled out and then veteran midfielder Mark Bresciano forcing Bravo into another sprawling save, this time one-handed low to his left.
Australia had a let-off when Alex Wilkinson got back to clear off the goalline from Vargas but Chile could not relax.
Cahill again demonstrated his renowned aerial ability when he climbed above his marker Gonzalo Jara but this time headed over.
Any hopes of securing a point vanished when substitute Beausejour drilled a low strike into the far corner in stoppage time.
Even so, the outcome was a victory of sorts for Australia coach Ange Postecoglou, hired in October to rejuvenate an aging team only to be faced with one of the toughest groups in December's draw.
"The good thing is that we believe in our football, we believe in our structure," said Cahill, who scored his 33rd goal for Australia.
"Last week they were questioning whether we could create chances - we did create quite a lot."
After the tougher-than-expected challenge from Australia, Chile recognised that they need to do better to get to the next stage. They play Spain in Rio de Janeiro on June 18.
"This is good to correct things and we need to play more complete games to face the strong teams ahead of us," Sampaoli said.
Alexis Sanchez put Chile ahead from close range after 12 minutes and two minutes later Jorge Valdivia made it 2-0 with a well-struck shot as the South Americans looked in control.