Tempers flared on the field between top scorer Brad Haddin (42) and a few Pakistan players after his captain Ricky Ponting refused to walk when he had clearly got a big edge to wicketkeeper Kamran Akmal.
Pakistan deservedly won the caught behind decision on referral but not before Haddin exchanged words with Pakistan players.
The low total seriously jeopardizes Australia's 34-match unbeaten streak in the World Cup. The last time the Australians lost in the ODIs marquee event was in the group stage of the 1999 edition to Pakistan. The Australians rebounded to beat Pakistan in the final in '99 and have successfully defended the title in 2003 and '07.
It was Australia's lowest first-innings total at the World Cup since 1992, when Pakistan won the title.
Ponting shared the best partnership by adding 63 runs for the second wicket with Haddin but the innings never gained momentum.
Pakistan's ploy to give new ball to leftarm spinner Abdur Rehman worked well on a slow wicket as openers Haddin and Shane Watson (9) struggled to give the innings a quick start.
Watson drove Rehman for a first ball boundary on the on-side before he was bowled by Gul (3-30) off a delivery which swung back into the right-hander and knocked the top of off-stump.
Ponting top edged a four behind the wicketkeeper off leftarmer Wahab Riaz before hitting an exquisite cover drive in the same over.
But Afridi intelligently rotated his bowlers on a slow wicket where it is tough for strokeplayers.
Ponting was shaping up well but needlessly tried to cut offspinner Mohammad Hafeez and got a big edge. South African umpire Marais Erasmus rejected the appeal before Pakistan rightly won on referral.
Haddin appeared to lose his cool in an exchange of words with Pakistan players when he edged Wahab Riaz as Australia slipped to 90-3.
Michael Clarke (34) and Cameroon White (8) tried to resurrect the innings before Australia's middle order collapsed, losing four wickets for 30 runs.
Abdul Razzaq, who was introduced into the attack in the 35th over, clipped the Clarke's bails with an inswinger and also got an edge of Mitchell Johnson (0).
Gul, who went off the field for treatment on his left hamstring after bowling five overs, returned to wrap up the innings by removing Jason Krejza (7) and Brett Lee (5).
Pakistan omitted fast bowler Shoaib Akhtar, who plans to retire from international cricket after the World Cup, preferring left-arm paceman Wahab Riaz in his place.
Pakistan also dropped out-of-form opener Ahmed Shehzad and recalled middle-order batsman Umar Akmal, who has recovered from a finger injury which sidelined him for the previous match.
Australia: Ricky Ponting (capt), Shane Watson, Brad Haddin, Michael Clarke, Michael Hussey, Cameron White, Steve Smith, Mitchell Johnson, Jason Krejza, Brett Lee, Shaun Tait.
Pakistan: Shahid Afridi (capt), Misbah-ul-Haq, Mohammad Hafeez, Kamran Akmal, Younis Khan, Asad Shafiq, Umar Akmal, Abdul Razzaq, Abdur Rehman, Umar Gul, Wahab Riaz.
Umpires: Tony Hill (NZL) and Marais Erasmus (RSA)
Tv umpire: Tyron Wijewardena (SRI)
Match referee: Chris Broad (ENG)
Pitch conditions: A slow pitch which looks brown and is likely to help spinners, but the turn will not be vicious.