Nathan Lyon took his best Sheffield Shield figures of 6 for 21 to bring New South Wales back into the contest at the SCG as Victoria suffered a significant middle-order collapse to waste a position of strength.

Lyon, who had a difficult Test series against India with nine wickets at 55.11, had broken the opening stand of 94 when Marcus Harris edged a delivery that bounced to slip but Victoria had moved to 2 for 152 before losing their last eight wickets for 48 to finish with a lead of just 35.

The slide started when captain Peter Handscomb flicked Trent Copeland to midwicket then Jake Fraser-McGurk was run out by Josh Hazlewood from mid-off after Matt Short had driven firmly to the fielder.

Seb Gotch faced 37 balls for 3 before driving to short cover and the careless strokeplay continued when Short flicked Lyon to midwicket.

Lyon then went through the lower order as Will Sutherland edged to slip before James Pattinson, Mitch Perry and Jon Holland all fell to failed attempts to clear the field either side of tea.

Lyon's haul was just his second five-wicket bag in the Sheffield Shield after the 5 for 94 he took against Queensland in 2018.

Copeland and Sean Abbott shared the other three wickets to fall to the bowlers leaving Hazlewood and Mitchell Starc to share combined figures of 0 for 115 from 30 overs. Hazlewood was steady, but Starc struggled as he conceded five an over.

Starc had been greeted by a pulled six from Nic Maddinson to the second ball of the day then the left hander had some fortune when he inside-edged a delivery into the ground which then bounced over Peter Nevill to take him to a 39-ball half-century.

His tempo slowed somewhat from that heady rate before he fell slashing at Abbott against the first ball after the first of the rain breaks that punctuated the day's playing, sending a thick edge flying quickly to second slip where Steven Smith held it well. It was the first of a number of misjudged shots that would prove costly for Victoria.

New South Wales were able to eat into the small deficit late in the day but did lose Nick Larkin in the fading light, trapped lbw by Scott Boland before bad light stopped play.