Australia battered and humiliated Sri Lanka by an innings and 201 runs to win the series in the second Melbourne Test midway through the third day on Friday.

Sri Lanka, trailing by 304 runs on the first innings, surrendered for just 103 for seven off 24.2 overs with Kumar Sangakkara retiring hurt and Prasanna Jayawardene and Chanaka Welegedara unable to bat because of injuries.

Paceman Mitchell Johnson was the dominant player with six wickets and an unbeaten 92 to be named man-of-the-match.

Sri Lanka somehow have to regroup amid their casualty ward of injured players for the third and final dead rubber Test starting in Sydney next Thursday.

Their remote hopes went out the door when star batsman Sangakkara retired on 27 after he was struck on the glove by a menacing lifter from Johnson.

Sangakkara immediately sought treatment from the physio and left the ground with noticeable swelling around his left index finger, indicating a possible fracture.

He was the second Sri Lankan player to suffer a hand injury in the Boxing Day Test with wicketkeeper Jayawardene receiving a hairline thumb fracture when also struck by Johnson in the first innings.

With paceman Chanaka Welegedara already ruled out of further involvement in the Melbourne Test with a hamstring injury, the Sri Lankan second innings ended at seven wickets down to complete a wretched Test for the tourists.

Facing a 304-run innings deficit after the Australians were dismissed for 460 with Johnson left stranded on 92, Sri Lanka virtually hoisted the white flag with the loss of four wickets in the first six overs.

Sangakkara, one of two 10,000-Test run-getters in the Sri Lankan batting lineup, was the last remaining hope along with vice-captain Angelo Mathews at lunch.

But it all unravelled in the middle session with Sangakkara's unfortunate exit and Mathews chopping the firebreathing Johnson on to his stumps for 35.

Dhammika Prasad clubbed spinner Nathan Lyon for successive sixes and went after a third before miscuing up in the air for an easy catch to Phil Hughes for 17.

Shaminda Eranga was last man out, caught close in by Ed Cowan off Peter Siddle for a duck and the misery was all over for Sri Lanka.

The tourists had a dreadful start with four wickets tumbling in the first six overs, including out-of-form skipper Mahela Jayawardene for a duck.

Opener Dimuth Karunaratne hesitated going for a second run off the third ball of the innings and David Warner pounced, with Johnson knocking down the stumps at the bowler's end and the Sri Lankan opener well short of his ground.

Fellow opener Tillakaratne Dilshan went next ball, spooning a rising Johnson delivery off his hip to Cowan at bat-pad for a duck leaving Sri Lanka at two for one.

Jayawardene, who has struggled for runs away from home in the last three years, lasted just six balls before he edged Jackson Bird on to his stumps in the second over of the innings.