England's record Twenty20 winning streak was ended at eight games after Australia secured a series-levelling four-run win in Melbourne.
Paul Collingwood's side were unable to chase down Australia's 147 for seven to suffer their first defeat in the shortest format of the game since their World Twenty20 success last May.
Spin duo Graeme Swann and Michael Yardy had restricted Australia after a quick start, claiming two for 19 apiece, to give England belief that they could seal another series win to follow their Ashes success.
But on the same ground where the little urn was retained three weeks ago, Tim Bresnan was unable to hit the final ball from Brett Lee for a six that would have won the game.
Aaron Finch, playing just his second game on his home ground at the MCG, was Australia's top scorer with an unbeaten 53 from 33 balls.
Both sides elected to name unchanged teams from the first match in Adelaide two days ago, when Chris Woakes sealed England's thrilling one-wicket win from the final ball.
Ian Bell immediately set England's chase in motion with a pair of back-foot drives to the cover rope in the first over from Shaun Tait.
Bell dominated the opening stand with Steven Davies, hitting all four boundaries that helped them reach 50 from 38 balls.
The Warwickshire right-hander was first to fall though when he chopped onto his stumps attempting a heave off Mitchell Johnson for 39 from 30 balls.
Johnson struck again three balls later when Kevin Pietersen thrashed a wide half-volley that Cameron White did well to hold at short cover.
Shane Watson claimed career-best figures of four for 15 in Adelaide and when he struck twice in quick succession to remove Paul Collingwood (six) and Davies (29), both caught by David Warner at mid-off, England had lost four for 28.
Eoin Morgan and Luke Wright settled the chase with a stand of 23 before Wright was also caught down the ground off Tait.
That left the tourists needing 36 from the last three overs and with the rate getting out of hand Australia claimed the key wicket of Morgan.
The left-hander looked to swipe Johnson (three for 29) over mid-wicket but could only find the waiting hands of Finch to depart for 14.
With 18 needed from Lee's last over, Woakes smashed a six to give England hope, but Bresnan could not deliver a similar blow when it was needed off the final ball.
Earlier, Australia made a brisk start after Warner was allowed an early reprieve when Bresnan failed to get hands on a skied chance.
A flurry of early boundaries followed as the hosts took 31 balls to reach 50 for the loss of Watson.
He had effortlessly lifted the ball over the ropes on two occasions, highlighted by a perfectly-timed flick over mid-wicket, before falling for 17 in the deep attempting to replicate the stroke off Woakes.
Warner was more brutish in his strokeplay, heaving Ajmal Shahzad to the leg-side ropes, while Tim Paine sweetly struck his second ball for a straight six off Woakes.
The introduction of Swann and Yardy, however, arrested the early onslaught as they took wickets to tie down the rate.
Swann removed Paine, for a 12-ball 21, to a top-edged sweep that Collingwood held at the second attempt.
Yardy then had Warner (30) caught in the deep with just his second delivery before Swann turned a ball sharply to have White lbw without scoring.
When David Hussey recklessly pulled Yardy to Woakes at deep mid-wicket,
Australia were suddenly five for 80 and went without a boundary for six overs until Finch swept Swann to fine leg.
With Yardy and Swann having bowled out their overs, Finch and Steve Smith kick-started Australia's innings again with a half-century stand from 39 balls.
Finch dominated it, with a couple of muscular sixes before Smith (13) was caught by Collingwood off Shahzad.
Finch remained and reached his first half-century from the penultimate ball as Australia posted 147 for seven.