VB Series second final, Melbourne: Australia 229-7 (50 overs) beat England 224 all out (49.3 overs) by five runs
Brett Lee read the last rites on England's dismal tour of Australia as the hosts wrapped up the VB Series with a thrilling five-run win in Melbourne.
Focus now switches to the World Cup after England, chasing 230, tossed away a winning position to be bowled out in the final over.
England had no answer to Lee in the tense closing overs
Needing 14 runs from 17 balls with four wickets in hand, they slumped to their 13th successive one-day loss to Australia, spanning four years.
Lee took his fifth wicket in a gripping finale to remove Andy Caddick before James Anderson was run out with three balls to go.
Half-centuries from Michael Vaughan and Alec Stewart were not enough for England and they failed to build on a positive performance in the field that saw Australia restricted to 229.
It capped a fairytale ending for Shane Warne, who graced his home crowd for the last time in a one-day international.
But Australia's win was soured by the groin injury to Michael Bevan, whose World Cup hopes hang in the balance.
Australia won the toss and batted on the second-hottest Melbourne day on record.
Matt Hayden and Adam Gilchrist got Australia off to a good start, reaching 39 in the 10th over before the recalled Andrew Flintoff struck.
Hogg put the game out of England's reach with a fine late knock
Flintoff, whose groin injury had kept him out of one-day cricket since the NatWest Series final last July, fooled Gilchrist with a subtle slower ball that found its way to Anderson at mid-off.
Caddick, whose first four overs cost just five runs, then claimed the scalps of Ricky Ponting and Damien Martyn to reduce Australia to 56 for three.
Ronnie Irani took the first of his three wickets when bowling a hapless Andrew Symonds through the gate.
Hayden (69 off 91 balls) stayed at the crease through a difficult period and was beginning to play his shots, his four in the 32nd over Australia's first for 14.
But Irani put a stop to that thanks to substitute Owais Shah's good catch in the deep.
England bowled well but let Australia back into the game
England looked set to go though Australia, but all-rounder Brad Hogg was merciless at the death.
His unbeaten 71 off 77 balls was responsible for Australia posting 86 in the last 10 overs.
England's chase got off to a poor start with three wickets falling in the first seven overs.
Lee grabbed two, including the scalp of Irani who failed again at three after holing out in the deep.
When Nick Knight followed England were 20 for three, but aptly enough it was Vaughan who got England back in the hunt with a lovely 60.
He steered England to a winning position but Warne would not be denied and Vaughan's dismissal in the 35th over was crucial.
Stewart, who has surely played his last game in Australia, threatened to carry England over the line but Warne again intervened to reassert for Australia.
England were then vulnerable as an inexperienced tail was left to do what was ultimately out of their reach.
Lee kept his cool, taking his 18th wicket to win the man-of-the-series award and send Australia off to South Africa as worthy favourites.
Australia: Ricky Ponting (capt), Michael Bevan, Andy Bichel, Adam Gilchrist, Brad Hogg, Brett Lee, Jimmy Maher, Damien Martyn, Andrew Symonds, Shane Warne, Brad Williams.
England: Nasser Hussain (capt), James Anderson, Ian Blackwell, Andy Caddick, Paul Collingwood, Andrew Flintoff, Ronnie Irani, Nick Knight, Alec Stewart, Marcus Trescothick, Michael Vaughan.