Exclusive in-play video: Watch as Australia send England crashing out of their own World Cup
Australia put England to the sword in an enthralling contest at Twickenham
England's nerves bit from the off, Ben Youngs rushing a chip in behind and sending it dead to waste an early platform.
Mike Brown was then caught out for a lax chase of Bernard Foley's exquisite line punt, unable to keep his toes out of touch just five metres from his own line.
Israel Folau botched the first scoring chance of the night, delaying the final pass to Rob Horne just long enough for Brown to interject and deny the Wallabies first blood.
Folau then failed with another fine chance, knocking Foley's crossfield chip forward in vying to collect and then score.
Foley opened the scoring from the tee however, posting a penalty after England strayed offside.
England ran a smart set play from a lineout, Jonathan Joseph scything into the 12 channel before Owen Farrell sent Watson clean through the line.
Lancaster's men turned the screw at the scrum, winning a penalty that Farrell slotted to draw the sides level at three apiece.
The scrum penalty whipped England into a frenzy, scintillating breaks punctuating the next exchanges - until a loose pass forced Joseph into a knock-on.
While England required waves of phases to threaten, Australia would jump from 22 to 22 in a flash.
A loose knock-on from Brown gifted Australia a scrum in England's 22 after one such lightning break, and from the resulting pressure Foley ghosted home for the first try.
The fly-half converted his own try to push Australia 10-3 to the good at the close of the first quarter.
Joseph almost raced clean through as England sought an immediate riposte, and Jonny May bamboozled Kane Douglas.
But Australia poached England's ball at the breakdown, always likely to be their chief defensive threat with Pocock and Hooper in tandem.
England attacked with zeal again, Joe Launchbury powering down the left flank, only for the Wallabies to win another fine turnover in their own 22.
And Michael Cheika's men twisted the knife still further when Foley and replacement Kurtley Beale exchanged passes for the fly-half to claim his and Australia's second try.
Cheika's men lead 17-3 at the break with England desperate for answers.
Lancaster went for broke at the break, dealing with a knock to Jonny May by performing another total backline rejig. George Ford replaced the Gloucester wing, with Joseph moving to the flank. Bath playmaker Ford slotted in at 10 and Farrell shifted to 12, nudging Barritt to outside centre.
England could shift their backline all they liked, they could not alter the course of the contest.
Mike Brown was turned over for the fourth time in the match, then Australia blasted England off a scrum to win a fine set-piece penalty.
Foley slotted the goal to move Australia 17 points to the good, heaping yet more misery on the hosts.
England built the phases in desperation - and finally their persistence paid off.
Watson powered down the right after Launchbury shipped on, simply refusing to be denied a try that scrambled England a lifeline.
Farrell stroked the touchline conversion to cut Australia's lead to 10 points, with little more than 20 minutes to play.
Australia pegged England into their own 22 in a bid to stem the resistance but Nick Phipps' wayward pass allowed Ford to fly-hack clear.
The Wallabies killed the ball at the resulting ruck amid blind panic and Farrell duly posted the points to leave Australia leading 20-13.
Just when England thought they had a lifeline, replacement Sam Burgess produced a high tackle on Hooper off the ball.
In the same melee Farrell hit Matt Giteau off the ball too and the Saracens 10 was sin-binned for his crude challenge.
Referee Romain Poite and Television Match Official Shaun Veldsman reviewed the sequence at length but opted not to take any action against Burgess.
Foley slotted the penalty to restore Australia's 10-point advantage, with England reduced to 14 men for the rest of the match.
Australia's unerring fly-half posted his fourth goal moments later, following another potent Wallabies scrum.
Toulon star Giteau raced in at the death to add insult to injury as Australia wrapped up their rout.
Foley nailed the touchline conversion to boot, to leave captain Chris Robshaw, coach Lancaster and England floored.
So Lancaster's reign as England coach must now be viewed as an abject failure.
And more than ever, the refusal to select overseas-based players, most notably Steffon Armitage, was brutally exposed.
Toulon's groundhog flanker Armitage is the only English forward who could mix it with Hooper and Pocock at the breakdown - and he was left kicking his heels on the Cote d'Azur.
Lancaster and company will be wringing their hands in pain but have only themselves to blame for an utterly catastrophic campaign.