Ben Stokes was dismissed for 11 as England were bowled out for just 68 to complete their Ashes humiliation.
The tourists capitulated on another embarrassing day in Australia.
Cumbrian all-rounder Stokes added nine to his overnight score before being bowled by Mitchell Starc.
That reduced England to 46-5 - and they were swiftly routed by a rampant home side who took an unassailable 3-0 lead and retained the urn.
Debutant Scott Boland took 6-7 as Joe Root's side collapsed to defeat by an innings and 14 runs at the MCG, with Stokes' score the second highest of the innings.
England's second innings total was their lowest in Australia since 1904.
The positions of head coach Chris Silverwood and captain Root are coming in for fresh scrutiny in the wake of England's disastrous displays.
Indeed, former Aussie wicketkeeper Brad Haddin has suggested Stokes is tactically a better captain than Root.
Silverwood told BT Sport that there were still "positives" to take from aspects of England's performance.
Root, meanwhile, said it would be "selfish" to focus on his own future at this stage.
Ahead of the final two tests in Sydney and Hobart, he said: "I can't be selfish and start thinking about myself.
"I'm in the middle of a very important series. My energy has to be all about trying to win the next game. The series isn't over yet.
"We've got two very big games and, more than anything, it would be wrong to look past that. That's all we have to focus on and that applies to me as well, as captain of this team.
"We need to put some pride back into the badge, to give people back home something to to celebrate from this tour.
"It's bitterly disappointing to be a 3-0 down but with two Test matches to go we have to come away from this tour with a couple of wins."
Root insisted he believed England could salvage the game before the start of the third day.
"You turn up today, you walk out with Ben Stokes and you feel like anything's possible," he said.
"To find ourselves in this position, everyone in this dressing room is gutted, it's as simple as that. I can't really add any more."
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