Ayrton Senna secured his tenth pole position of the season, and 52nd overall, in his McLaren-Honda with a time of 1:15.671, the fastest recorded on the Adelaide street circuit to date. His teammate Gerhard Berger qualified alongside him on the front row. Nigel Mansell, in his final race for Ferrari, took third, just ahead of teammate Alain Prost. Jean Alesi in the Tyrrell and Riccardo Patrese in the Williams completed the top six. The Benettons of Nelson Piquet and Roberto Moreno were seventh and eighth, followed by Thierry Boutsen in the second Williams and Pierluigi Martini in the Minardi. David Brabham, driving for the Brabham team, qualified 25th, becoming the first Australian to drive in his home race since Alan Jones in 1986.
Before the race, a television interview with Ayrton Senna featured former triple World Champion Jackie Stewart claiming Senna was involved in too many accidents for a driver of his ability. Senna, visibly annoyed, challenged Stewart to review his facts, stating he could not believe someone with Stewart's experience would call him a dangerous driver.
On race morning, during the drivers' briefing, McLaren boss Ron Dennis inquired about the legality of straight-lining the chicane after the start. FISA officials advised against it due to potential car damage. Alain Prost then walked out of the meeting, an action that earned him a 'yellow card' from FISA but no fine, which puzzled many given that such an action usually resulted in a fine.
The annual end-of-season drivers' photo shoot took place before the race. As it was the 500th World Championship Grand Prix, a separate photo was taken with several attending World Champions, including Juan Manuel Fangio. Alain Prost chose not to appear in either photo, still upset over the events at Suzuka and not wanting to be photographed with Ayrton Senna. His public statements following the Japanese Grand Prix, where he accused Senna of deliberately taking him out to win the World Championship, led to criticism of his mental state from some, including former World Champion and BBC commentator James Hunt. Hunt, who was in the photo shoot with Fangio, Sir Jack Brabham, Denny Hulme, Stewart, Senna, and Nelson Piquet, commented during the race that Prost seemed to be "a driver who was under a form of mental collapse" after losing the championship to Senna. Senna later stated in 1991 that he was going to go for the first corner gap regardless of the outcome, famously saying, "If you no longer go for a gap that exists, you are no longer a racing driver."
Other living World Champions not in attendance for the photo shoot included Phil Hill, John Surtees, Emerson Fittipaldi, Niki Lauda, Mario Andretti, Jody Scheckter, and Keke Rosberg. Notably, Australia's 1980 World Champion Alan Jones was at the circuit, racing a Ford Sierra RS500 in support races and performing pit reporter duties for Channel 9, but was not in the photo shoot.
Nelson Piquet, driving his Benetton, secured his second consecutive victory, marking the first time he had achieved back-to-back wins since the 1987 German and Hungarian Grands Prix. He finished 3.129 seconds ahead of Nigel Mansell, who had attempted a late passing move under braking for the hairpin at the end of the Brabham Straight, nearly taking out both cars. Piquet, who had a strong race, overtook Patrese at the start and Alesi a few corners later. He then passed Prost on lap 3 and outbraked Berger for third place on lap 9. He later overtook Mansell on the pit straight when Mansell's first set of tires degraded.
Alain Prost, despite a good start, was blocked by a slow-starting Berger and drove an unremarkable race, making a rare mistake by running wide at Brewery Bend late in the race while trying to hold off Mansell. Prost ran in fifth for most of the race but finished third after Senna retired from the lead on lap 61 with gearbox trouble, and after Berger also ran wide at Brewery Bend. Berger finished fourth, 9.6 seconds behind Prost. The Williamses of Thierry Boutsen, the 1989 Australian Grand Prix winner, and Riccardo Patrese rounded out the top six.
On lap 50, Senna broke Gerhard Berger's 1987 lap record of 1:20.416 with a time of 1:19.302. In his pursuit of Piquet, Mansell continued to lower the lap record, eventually setting a 1:18.203 on lap 75. Piquet, in an effort to stay ahead of Mansell, set his fastest race lap on lap 79 with a time of 1:18.527. He then ran wide at Brewery Bend on lap 80, allowing Mansell to close within two seconds. Piquet's fastest lap, set on his starting tires, was the second fastest of the race. In the post-race interview, Piquet humorously remarked that after his lap 80 off, he had to "drive like hell" over the last lap and a half, and that the "shit almost hit the fan" during Mansell's final overtaking attempt. Nine drivers, including Mansell, Piquet, Prost, Senna, Moreno, Boutsen, Alesi, Patrese, and Berger, surpassed Berger's 1987 record, with only Berger failing to go under 1:20.000 among that group.
The victory secured Piquet third place in the Drivers' Championship on countback, having the same number of points as Berger but two wins to the Austrian's none. It also secured third place in the Constructors' Championship for Benetton, matching their best finish from 1988.