Wales survived a brutal Australian fightback in the final minutes to claim only their third success over one of the southern hemisphere's "big three" since rugby turned professional in 1995.
The hosts, facing an Australian side seeking a clean sweep of victories on their autumn tour, rose to the occasion to produce the scintillating rugby that earned them plaudits during their second Six Nations clean-sweep in four seasons.
Wales had only beaten Australia once in their 14 previous meetings, but they started this game with renewed gusto.
And they grew in confidence when the Wallabies lost their influential captain Stirling Mortlock to concussion inside two minutes after a nasty collision with Jamie Roberts.
Gatland proud of Wales performance
Roberts was clearly affected by the clash and the Blues rookie was replaced by Andrew Bishop in the 18th minute before later being taken to hospital with a suspected fractured skull.
The Welsh made their mark 90 seconds later when the prolific Shane Williams finished a move he had started.
Byrne and a groggy Roberts played their part, with the former helping on Gareth Cooper's looping defence-splitting pass into the arms of Williams to score his 44th Wales try, extending his Welsh record.
Wales looked revived following bruising defeats by the world champions South Africa and the All Blacks in this November series, as Gatland's men attacked the Australians with purpose and intensity.
But the creaking Welsh line-out, so often their Achilles heel, was exposed once more as Alun Wyn Jones' flick from Matthew Rees' throw bounced awkwardly and straight into the path of Chisholm.
Lee Byrne's performances at full-back for Wales make him a certain for the Lions team, let alone the squad
Former Lions and England centre Jeremy Guscott
The giant lock dashed a full 70 yards to expose Wales' defence and score his sixth try of his international career.
Matt Giteau's prolific boot added the extras before the Australian fly-half was successful with a expertly executed drop-goal to give the visitors a lead their play did not deserve.
Stunned Wales did not buckle and continued their attacking sorties into the under-fire Australian defence.
The wave of attacks was too much for Wallabies hooker Stephen Moore, who was shown the yellow card for a technical infringement and after fly-half Jones had kicked a penalty, Wales capitalised on their one-man advantage.
Try-scorer Williams turned provider just before the break as he came off the wing to beautifully unload a pass for Byrne.
The on-form full-back, at an angle, exploded through the resulting gap for his sixth Welsh try, a score that Jones improved with a straightforward conversion.
Wales' half-time advantage should have been more than five points thanks to Martyn Williams.
Impressive scrum-half Cooper's stunning burst broke the Australian line and veteran flanker Williams provided the support.
But with a clear run to the line ahead of him, Williams dropped Cooper's off-load and knocked the ball on.
Wales should have started the second half as they finished the first but Scarlets fly-half Jones squandered a wonderful chance to extend the lead to eight points.
Giteau was not so wasteful when given the chance to punish yet more Welsh indiscipline, narrowing the gap to 15-13.
Wales could have restored a five-point lead minutes later but again Jones missed with a penalty attempt.
Jones' failure with the boot ensured the Australians kept in touch as Wales' continued lack of a cutting edge gave the visitors hope.
The exhilarating pace of Wales' first period in their final autumn Test had taken its toll.
But when Wales were lagging, Jones made amends for his earlier kicking indiscretions to hand Wales much-needed breathing space with a drop-goal in the 68th minute.
Jones then slotted over another penalty to extend his side's advantage to 21-13.
It was required as Ioane dived over to ensure a frantic last few moments.
Giteau failed with the drop-kick conversion and Wales held on for a famous win as Australia ended their European tour with their first defeat.
Wales: Byrne, M. Jones, Shanklin, J. Roberts, S. Williams, S. Jones, Cooper, Jenkins, Rees, A. Jones, Gough, A. Jones, R. Jones, M. Williams, Powell. Replacements: Bishop for J. Roberts (18), D. Jones for Powell (62). Not Used: Hibbard, Yapp, Charteris, M. Roberts, Hook.
Australia: Mitchell, Hynes, Cross, Mortlock, Ioane, Giteau, Burgess, Robinson, Moore, Baxter, Chisholm, Sharpe, McMeniman, Waugh, Brown. Replacements: Tuqiri for Hynes (34), Cooper for Mortlock (3), Freier for Moore (69), Mumm for McMeniman (69), Smith for Waugh (63). Not Used: Dunning, Cordingley.
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