Vettel made the most of a mid-race virtual safety auto to pit and emerge in front of a stunned Hamilton of Mercedes before holding his nerve to claim a second straight Albert Park triumph in the Formula One season opener.
Daniel Ricciardo admits he is still "pissed" at the three-place grid penalty he has been handed for the Australian Grand Prix, calling the drop "s***house".
To date Hamilton has only converted his string of pole positions at Melbourne into two wins and just one for Mercedes.
But he thrilled locals with a barnstorming run at the Albert Park circuit, recording the fastest lap of the race (one minute 25.945 seconds on the 54th lap) in his last-ditch bid to chase down Ferrari's Kimi Raikkonen to snatch the last spot on the podium.
Ricciardo is relishing his first chance to test the F1 contract waters - "I know what I want, and the performance side is more important than ticking the money box, " he said late past year - but wants to shut down chatter over his future. "We didn't have a lot of issues which is good".
Hamilton had started on pole but couldn't hold off Vettel, who won at Melbourne fo the second year in a row after pinching the lead from the pit lane.More news: Zuckerberg takes out ads to apologize as Facebook data misuse crisis intensifies
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Sitting next to Hamilton at the post-qualifying press conference, Vettel said: "So, what were you doing before?"
"We're obviously better than eighth, so we will try and make it happen".
"We aborted the second Q2 lap but generally I was feeling okay with the balance".
He said, "I didn't expect that much". And the two phrases he lived his life by: "No Regrets", because he never wanted his F1 career to have any, and "Only Memories", inspired by a favourite song by British hardcore band Heart in Hand.
Red Bull had lifted four straight drivers' and constructors' world titles when the Australian was promoted from Toro Rosso in 2014, but have not claimed another since, with Ricciardo winning five races for the senior team.
But although both drivers are more bullish about their long-run performance than being able to match Mercedes in qualifying trim, they believe Saturday's expected rain will help them.
And it seemed like the season opener was Hamilton's to lose but no one told Vettel.