Group A, Port Elizabeth: Australia 208-8 (49.4 overs) beat England 204-8 (50 overs) by two wickets
Australia clawed their way back from the brink of defeat to deny England in a nail-biting encounter.
Australia made it 14 successive one-day victories over England when Michael Bevan hit the winning runs with just two balls left.
England were within sight of their first one-day win in four years over their fiercest rivals when Australia slumped to 135 for eight, chasing a modest total of 205.
But Bevan (74) and Andy Bichel (34), who had earlier returned his best-ever bowling figures of seven for 20, guided Australia home to leave England's Super Six hopes hanging by a thread.
England captain Nasser Hussain, along with the large contingent of England fans inside St George's Park, will no doubt still be wondering just how victory eluded them.
Australia made a terrible start, losing four wickets inside the first nine overs, all four Australian batsmen out playing rash shots off Andy Caddick.
Bevan and Darren Lehmann led a tentative recovery but when the latter edged a catch to Alec Stewart from Craig White, it prompted the sort of batting collapse with which fans of England are all too familiar.
Ashley Giles celebrated his first World Cup wicket, taking a smart return catch from Andrew Symonds, and he doubled his tally in the next over when Brad Hogg departed for one.
Brett Lee's run-out had England's fans baying for an upset, with Australia teetering at eight wickets down.
But Bevan, whose only previous contribution to Australia's cause was 17 against Namibia, kept his nerve brilliantly as Hussain rotated his bowling attack in a vain attempt at unsettling him.
Bichel slogged James Anderson over mid-wicket for six to demoralise England before Bevan deservedly took the glory with the winning runs off Andrew Flintoff.
Earlier, Bichel produced the second best bowling figures in World Cup history to put the brakes on England after they had made an encouraging start.
Marcus Trescothick and Nick Knight attacked the Australian bowlers with verve to take England to 50 without loss but once Bichel replaced Brett Lee, England's plans came dramatically off the rails.
Glenn McGrath 7-15 v Namibia (Potchefstroom 2003)
Andy Bichel 7-20 v England (Port Elizabeth 2003)
Winston Davis 7-51 v Australia (Headingley 1975)
Gary Gilmour 6-14 v England (Headingley 1975)
Ashish Nehra 6-23 v England (Durban 2003)
Chaminda Vaas 6-25 v Bangladesh (Pietermaritzburg 2003)
In Bichel's first over, Knight fended a shorter delivery to Damien Martyn and in his second, Michael Vaughan and Hussain fell to two destructive balls.
And Trescothick, who scored 37 from 36 balls, fell to Glenn McGrath before Paul Collingwood became Bichel's fourth victim.
It was left to Flintoff and Stewart to steady the ship for England but just as England began to pile on the runs again, Bichel returned to the attack.
Both Flintoff and Stewart fell just short of their half-centuries after adding 90 for the sixth wicket and Giles holed out to Bevan for Bichel's seventh wicket in his final over.
Caddick and White saw off Bichel's final few balls, and the remaining three overs, before the Australian bowler received a deserved standing ovation from the St George's Park crowd.
Australia: Matthew Hayden, Adam Gilchrist, Ricky Ponting
(captain), Damien Martyn, Darren Lehmann, Michael Bevan, Andrew
Symonds, Brad Hogg, Brett Lee, Andy Bichel, Glenn McGrath.
England: Marcus Trescothick, Nick Knight, Michael Vaughan,
Nasser Hussain (captain), Paul Collingwood, Alec Stewart, Andrew
Flintoff, Craig White, Ashley Giles, Andy Caddick, James
Umpires: Russell Tiffin (Zim) and Aleem Dar (Pak)
TV Umpire: David Orchard (Rsa)
Match referee: Wasim Raja (Pak)