This is Leclerc's third win of the year and Ferrari's first at the Red Bull Ring since Michael Schumacher in 2003.
It is Max Verstappen's third consecutive victory after Charles Leclerc’s Ferrari broke down while he was comfortably in front.
Mercedes' Lewis Hamilton said his team still has time to "fix this car and extract the full potential", ahead of the Emilia Romagna Grand Prix at Imola this weekend.
The 24-year-old dominated the Australian Grand Prix from start to finish to take the chequered flag ahead of Red Bull's Sergio Perez by more than 20 seconds.
Lewis Hamilton says his top-five slot on the grid for F1 Australian Grand Prix has come despite Mercedes making little to no progress with its car.
The ban on body piercings and other forms of jewellery was introduced in 2005 in a bid to protect drivers, but F1 now wants to enforce it strictly after some drivers were spotted wearing jewellery while in their cars.
Mercedes F1 team took the decision following “constructive dialogue” with the FIA, the world’s motorsport governing body, over an investigation into the title-deciding Abu Dhabi race to “create clarity for future”.
Verstappen was ordered to hand back the lead, for going wide as Hamilton tried to pass on lap 37, but when he slowed Hamilton ran into the back of him.
The Mercedes seven-time champion comfortably held off his arch Dutch rival's Red Bull under the Losail circuit's lights to leave the battle for the F1 drivers' crown delicately poised with only two races remaining.
Lewis Hamilton will start 11th on Sunday because his team incurred a 10-place grid penalty by changing his engine ahead of the race.
British Formula 1 driver Lewis Hamilton received the penalty for Sunday's race because he exceeded his allocation of new engines.
Lewis Hamilton, the seven-time world champion, also took the championship lead by two points from Max Verstappen, who finished second.
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