England retained the Ashes in Australia for the first time in 24 years when they won the fourth Test by an innings and 157 runs on Wednesday.

- Scorecard

The victory, sealed before lunch on the fourth day, gave holders England a 2-1 lead in the series, which will be completed with the fifth and final Test in Sydney next week.

The England players embraced and pumped their fists in the air upon the final wicket as thunderous cheers rang out from England's "Barmy Army" of supporters who had sung joyously throughout the morning at the Melbourne Cricket Ground.

"We worked very hard to achieve this," said England captain Andrew Strauss.

"To know that we're taking that urn home with us is very special. It's been a really top quality performance from the lads this week.

"We're very excited, it's special occasion the MCG game and to come out here and retain the Ashes is something that will live long in all our memories."

Australia skipper Ricky Ponting was gracious in defeat.

"It's been a tough week, to be beaten by an innings and plenty is obviously a disappointing result, but you've got to give full credit to England with the way they've played their cricket from the start of the tour," he said, adding that his own batting performance had been "horrible".

Australia had resumed on 169 for six, still facing a 246-run deficit to make England bat again but lost their remaining wickets shortly before lunch to be all out for 258.

Chris Tremlett removed Mitchell Johnson for six in the second over of the morning, the Australian paceman pushing half-heartedly at a fuller delivery that took an inside edge before crashing into off-stump.

Peter Siddle defiantly slogged his way to 40 before belting a lofted drive off Graeme Swann straight to Kevin Pietersen at long on.

The injured Ryan Harris did not take his place leaving Ben Hilfenhaus to take the crease. The paceman was out to Tim Bresnan for a fourth-ball duck, caught behind to wicketkeeper Matt Prior to complete the innings.

Brad Haddin enjoyed a swashbuckling partnership with Siddle, striking four boundaries and a six off Graeme Swann, but was left stranded on 55 not out.

Strauss's team became the first to retain the Ashes in Australia since Mike Gatting lead the tourists to a 2-1 series win in 1986/87, the decisive victory also sealed at the MCG.

Tim Bresnan, called into the side for Steve Finn, was the pick of England's bowlers in the second innings, finishing with 4-50 after ripping through Australia's top order after tea on day three to quash the hosts' slim hopes of salvaging the Test.

The win was a stunning turnaround from the third Test in Perth, where England slumped to a 267-run defeat that levelled the series 1-1.

Australia's resurgence on the fast WACA wicket proved little more than a mirage when their batsmen, brittle throughout the series, were skittled for a first innings total of 98, a record low against the tourists at the MCG.

England pressed the advantage by romping to 157 for no loss on the first day and anchored by a sublime unbeaten century by Jonathan Trott, who was named man of the match, posted a first innings total of 513 on day three.

That gave the hosts a 415-run deficit to make England bat again and any hope of a fightback was quashed after tea when Australia's top order were blown away by Bresnan.

They limped to 169 for six at stumps and the victory early on day four for England was all but a formality.

"We owe it to ourselves, we owe it to our fans around Australia to bounce back quickly and show a bit of pride in what we do for our country," Ponting said of the final Test in Sydney.

"Although we can't win the Ashes, there's a good chance for us to level the series."

Strauss said England would be celebrating hard on Tuesday but be back fighting hard until the last ball in Sydney, however.

"We came here to win this series, we've retained the Ashes but it would be a very disappointing if we didn't manage to win the series."