At the start Rubens Barrichello takes the lead with Jean Alesi and David Coulthard in hot pursuit. Olivier Panis has a more difficult time and is passed on the first lap by Heinz-Harald Frentzen and Michael Schumacher. The Ferrari driver tries to overtake Frentzen but Heinz-Harald holds off the challenge. During the first lap Hakkinen scrambles from 14th to ninth position.

On the second lap Coulthard passes Alesi to take second place and begins to chase after Barrichello. He takes the lead at Adelaide Corner on lap six and sets a string of fastest laps to build up a lead of 7.6secs by lap nine. Suddenly his McLaren falters and David pulls off with a suspected gearbox failure. This leaves Barrichello in the lead again with a four second advantage over Alesi. Further back Johnny Herbert disappears with gearbox trouble, while Hakkinen continues his charge, moving up to sixth place on lap five and fourth on the same lap as Coulthard goes out after a lively battle with Michael Schumacher. Mika then chases after Frentzen and gets ahead on lap 15. He then catches Alesi and passes the Frenchman when both run wide at the Adelaide hairpin on lap 19.

Rain clouds move in from the south and there is a downpour as the leaders begin lap 21. The bottom half ot he field pits immediately but the frontrunners have to complete another lap before they can get to the pits. Barrichello emerges ahead of Hakkinen, Alesi, Frentzen, Michael Schumacher and Panis. At the same time Damon Hill goes off and has a puncture. He rejoins a lap down but later retires. Giancarlo Fisichella also has a spin as the rain intensifies. On lap 25 Alesi spins out and is forced to retire. The Race Director decides to send out a Safety Car and it picks up the leaders at the end of lap 25 and for the next 10 laps the field runs under caution. While the field catches up with the queue behind the Safety Car Jacques Villeneuve, Alexander Wurz and Marc Gene all aquaplane off and retire.

The race restarts at the beginning of lap 36 but conditions are still treacherous and it is several laps before the first moves amongst the frontrunners. On lap 38 Hakkinen tries to take the lead at the Adelaide hairpin but spins and drops to seventh place. This puts Frentzen second but almost immediately he is passed by Michael Schumacher. The Ferrari driver then closes the gap on Barrichello and after a great battle, during which they exchange the lead in the Adelaide Hairpin, he gets ahead on lap 44. He then begins to build up a lead. Barrichello finds himself at the head of a queue of cars consisting of Frentzen, Panis, Ralf Schumacher and Eddie Irvine - the latter two having climbed through the field from their low grid positions.

Michael Schumacher builds up a seven second lead but on lap 50 he suddenly loses a lot of time - probably from an electronic problem. He manages to stay ahead of Barrichello and begins to build a new lead but on lap 54 he comes into the pits for fuel and a change of steering wheel (to try to cure the electronic problem), leaving Barrichello in the lead. Also pitting for fuel are Ralf Schumacher and Irvine. While this is happening Hakkinen forces his way past the two Prosts. He challenges Frentzen for second on lap 57 and then chases after Barrichello. Mika passes the Stewart driver for the lead on lap 60.

Both Prosts stop and drop out of the top six while Frentzen runs into trouble on lap 60 with his gearbox and loses a lot of time to Barrichello. Rubens and Hakkinen still have to pit, however, and when they stop on lap 65, Frentzen takes the lead. It looks as though he will have to stop as well but it becomes clear that the Jordan engineers have taken a risk on a heavy fuel load at the first stop and he is able to stay ahead to win Jordan's second victory. Hakkinen finishes second after a remarkable race while Barrichello is third. Michael Schumacher struggles with his tyres in the closing laps and is passed three laps from home by his brother Ralf, who gives Williams a good fourth place from 16th on the grid. Michael Schumacher and Irvine give Ferrari fifth and sixth, while the two Prosts finish seventh and eighth, Trulli beating Panis to the line. The only other finisher on the same lap as the leaders is BAR's Ricardo Zonta.