Sebastian Vettel's fastest time was just over three seconds slower than the Albert Park lap record set in 2004 by Michael Schumacher. Getty Images
The German steered the car he has nicknamed 'Hungry Heidi' around the Melbourne
street circuit in one minute 27.211 seconds to finish ahead of the Ferrari duo of Brazilian Felipe Massa (1.27.289) and Spain's Fernando Alonso (1.27.547).
Briton Lewis Hamilton was fourth quickest in his first outing for new team Mercedes, ahead of Vettel's Australian team mate Mark Webber, still searching for his first win in his home race.
Finn Kimi Raikkonen had set the early pace in his Lotus and ensured four former world champions would finish in the top six, while Adrian Sutil made an excellent start on his return to Force India after a year out of the sport by setting the eighth quickest time.
McLaren had a disappointing morning with 2009 world champion Jenson Button, who has won three of the last four Australian Grands Prix, only managing the ninth fastest time and his new team mate, Mexican Sergio Perez, lapping 11th quickest.
Spectators at Albert Park had to wait for more than half an hour of the session before local hope Daniel Ricciardo put the first lap time on the board for Toro Rosso.
There was a further wait before the top drivers joined the fray, spearheaded by Raikkonen who posted the quickest time of the day and then improved it.
By now, all the main title contenders were out on the track where temperatures had reached 38 degrees Celsius, and Alonso swept to the top of the time sheets ahead of Hamilton.
Vettel bettered them both with just his second timed lap and although Massa immediately edged in front, the German shaved another couple of hundredths of a second off his time to reclaim top spot.
The last 10 minutes saw a flurry of activity in the pit lane and on the track but no one was able to go faster than Vettel on the circuit where he won convincingly in 2011 at the start of his second world title triumph.
Massa flirted with danger on a sometimes slippery track and came off into yellow gravel at a corner as he tried to get a little bit more out of his car.
Force India's Paul Di Resta slid off the track more spectacularly at the same spot minutes later but was also able to get back onto the circuit under his own power.
The second free practice session for Sunday's race takes place later in the day with a third before qualifying on Saturday.