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Vettel won by almost 10 seconds from Hamilton and Mercedes teammate Valtteri Bottas in a commanding victory of tactics and superior speed around the Albert Park street circuit.
Ferrari hadn't won in Melbourne since Kimi Raikkonen's 2007 victory, and it was Vettel's second triumph in Australia after winning the 2011 race with Red Bull.
It was also a major fillip for the fledgling season and the new generation of quicker cars after Ferrari's superior preseason test times as they chase their first world constructors' -title since 2008.
The victory was the German four-time world champion's fourth for Ferrari and his first since Singapore in 2015 and his 43rd career win.
"A title challenge is a long way ahead. For now we are just over the moon at the start we have made here today," Vettel said.
Ferrari got the better of Mercedes in the sole round of tire changes which ultimately decided the race.
Hamilton's early stop meant he rejoined behind the Red Bull of Max Verstappen which allowed Vettel to open up a decisive gap at the head of the field.