The hosts were dismissed for 262 in their second innings after losing 4-75 during the first session of day four.
Wicketkeeper Alex Carey (53) helped push Australia's lead over the crucial 300-mark with his highest score since the first Test of the Ashes in June.
Shaheen Afridi took 4-76 in Australia's second innings at the MCG to claim six wickets in the match. (Joel Carrett/AAP PHOTOS)
Star Pakistani quick Shaheen Afridi (4-76) made a welcome return to form with his best figures of the series, while fellow left-armer Mir Hamza (4-32) proved to be a serious handful.
Pakistan, who have lost 15-straight Tests in Australia, will need to create history to avoid going down 2-0 in the Benaud-Qadir series.
The highest successful fourth-innings chase at the MCG was England's 7-332 in 1928.
The last team to score more than 300 in the fourth innings of a MCG Test was Pakistan in a losing cause back in 1990.
Australia captain Pat Cummins was dismissed by Pakistani pacer Aamir Jamal in peculiar fashion on Friday morning.
Cummins was given out by the on-field umpire, but the star quick decided to review the caught-behind decision.
After nothing showed up on hotspot, the original decision eventually stood due to a spike on snicko.
"...What we're looking for is a spike as the ball goes past the bat or up to one frame past the bat which allows that distance between the noise and the stump microphone," former international umpire Simon Taufel told the Seven Network.
Carey's crucial cameo takes pressure off the left-hander, who has been down on form with the bat and was dropped during Australia's ODI World Cup campaign.
Carey followed up on Mitch Marsh's good work on Thursday when the allrounder smashed a sparkling 96.
Marsh joined Steve Smith (50) at the crease when Australia were reeling at 4-16, but the pair put on a potentially matchwinning 153-run stand.
The 32-year-old was given a life when Australia were 4-46 when he was dropped by Abdullah Shafique in the slips cordon.
Shafique, who also dropped a simple chance on day one, was taken out of the slips on Friday and replaced by Babar Azam.
The former Pakistan captain hung onto a brillant catch to dismiss Mitchell Starc to help bring Australia's innings to a closer end.
11°C