New milestone for McGrath as he keeps Australia in charge
England's fighting spirit was frayed by another class performance from the Australians, spearheaded by Glenn McGrath who captured his 350th Test wicket.
By the close of an entertaining third day, cut short by rain and bad light, the tourists were 207 runs ahead with nine wickets still in tact.
Michael Slater was England's only second innings success, after Darren Gough forced him to play on having reached 16 and Ricky Ponting had another escape, for the second time in the match, when he was dropped by Mike Atherton on four.
A capacity Headingley crowd were kept spellbound by the action and drama provided throughout the day, with Alec Stewart playing a whirlwind innings down the order and McGrath reaching his milestone to become the third Australian in history to take 350 wickets.
A sense of theatre was created with the dismissal of England captain Nasser Hussain, just 11 minutes into play. After his valiant effort on the second day's play, he was cornered by a ball from McGrath that kept low and nipped back to hit him on the pad.
He had added a single to his overnight total but his departure came as a major blow for England after he and Mark Butcher had raised hopes with a stand of 91 that promised a serious and hefty response to Australia's first innings total of 447.
Butcher went nine balls later, calling for an impossible single and falling four feet short when Brett Lee broke the wicket. He made 47 but the prospect of another England collapse looked likely with the score 158 for four, two new batsmen at the crease and the follow-on target still 90 runs off.
Mark Ramprakash produced one of the highlights of the day by reacting to a painful blow on the wrist from Jason Gillespie with a powerful punch through the covers for four, to the great delight of a supportive crowd.
When Australia took the new ball, he had reached 40 and looked settled and confident but his innings was brought to a premature end when he edged McGrath to the wicket-keeper, Gilchrist taking it in front of his nose.
Meanwhile, Stewart was starting to gain momentum, showing his habitual liking for the new ball despite his demotion to number seven. He exploited a wayward spell from Lee, hitting him for three fours in one over.
He saw Alex Tudor come and go then watched as Andrew Caddick was pummelled by Lee, who had clearly singled him out for some special hostility. For the crowd, it provided some of the best entertainment of the day as Caddick retaliated to a knock on the elbow by square cutting him for four.
Lee was bowling as fast as he has ever bowled, his fastest ball reaching a remarkable 92.6mph and his next ball careered straight into Caddick's stumps but as the bails went flying, up went the umpire's hand to signal a no-ball, to huge cheers all round.
With the score on 299 for nine, the players left the field for bad light and returned to add another ten to the total before Alan Mullally became McGrath's seventh victim of the match and the 350th of his career.
It left Stewart unbeaten on 76, having faced 83 balls, and after a difficult series it marked a welcome return to form.