Offspinner Nathan Lyon was often unplayable with 6-49 and passed 350 test wickets in a remarkable turnaround for the Australians who had been reduced to 122-8 in their first innings at a hostile Edgbaston.
"It's disappointing, we got ourselves in a really strong position," England captain Joe Root told the BBC.
Allrounder Chris Woakes provided England's top score with a defiant 37 at No. 9 after the hosts crumbled from 60-1 to 97-7. Woakes was the last man out in the 53rd over to Pat Cummins (4-32), sending the ball to Steve Smith in the slips, as England collapsed in the afternoon.
England had resumed after lunch on 85-4. Jos Buttler (1) went in the first over, bowled by Cummins, and Jonny Bairstow was then caught by Cameron Bancroft off Cummins for his 100th test wicket. In what has been a nightmare test at times for the umpires, Bairstow reviewed Joel Wilson's decision but he was unsuccessful, leading one BBC pundit to exclaim "Joel's got one right!"
Lyon reached the 350 landmark when Ben Stokes (6) was caught behind.
The spinner went on to dismiss Moeen Ali for his five-for and had Stuart Broad caught by Smith for a golden duck. Jimmy Anderson came out to bat despite lingering injury concerns — he bowled only four overs in the entire test — and denied Lyon his hat trick.
Rory Burns (11) was the first man out Monday — caught by Lyon off Cummins — when England had added only six runs after starting on 13-0, and Root (28) was the last man out in the morning, visibly angry with himself after tamely sending the ball to Bancroft at short leg off Lyon.
Lyon had come on to bowl after an hour's play and proved the threat that England feared with three wickets before lunch. Lyon also soon settled a big question of the day: Could white-ball specialist Jason Roy patiently stay in without taking risks in smashing quick runs? That was answered in Australia's favor when the explosive opener, playing only his second test, needlessly advanced down the wicket against Lyon. The ball turned and clattered into the stumps. Roy was out for 28 after sharing a 41-run partnership with Root and England on 60-2.
Bancroft caught Joe Denly (11) at short leg after Lyon struck again to leave England 80-3 before Root was dismissed.
England's instinctive batting aggression paid huge dividends in its Cricket World Cup title last month, including a semifinal win over Australia in Birmingham, but the switch from white to red ball is proving a tough challenge so far against its well-prepared opponents.
Australia even had the luxury of declaring at 487-7 in its second innings on Sunday to set England an unlikely winning target of 398.
England had taken a 90-run lead after the first innings with 374 in reply to Australia's 284. But man-of-the-match Smith's centuries in each innings (144 and 142) proved far too much for a humbled England, especially without its record test wicket-taker Anderson able to bowl after the opening session.
Root said it was easy to be wise in hindsight and that Anderson had gone through the normal selection process and passed a fitness test. Root called it "part and parcel of test cricket, sometimes things go against you."
And Root should know. He had survived a scare on 4 when he was given out by Wilson leg before wicket against pacer James Pattinson. He went for review and the ball was shown to be missing.
Play was briefly held up by a malfunctioning stump mic before Root was given out again by Wilson for lbw when on 9, this time off Siddle. Root immediately reviewed and was shown to have clearly got his bat to the ball first.
The second of five tests starts at Lord's on Aug. 14.