Australia did well in its first innings to fight to 380 despite India picking three spinners and Ravi Ashwin taking 7-103 on a dust bowl of a pitch in Chennai.
James Pattinson then did well to bowl Murali Vijay, Virender Sehwag and Cheteshwar Pujara to have India 3-105 late on the second day, but by stumps the home side got to 3-182 and now by stumps on the third day with Dhoni's not out 206 and after a 107 from Virat Kohli, India is 8-515.
That gives India a lead of 135 with two wickets remaining and two days still to play in the First Test with Dhoni on 206 and Bhuvneshwar Kumar 16.
While Sachin Tendulkar made 81 and Kohli did well to make 107, it has been Dhoni that has taken the game away from Australia.
He now has scored 206 in just 243 balls with 22 fours and five sixes with Dhoni taking an especially big liking to the off-spin bowling of Nathan Lyon. Dhoni has hammered 91 runs off 73 balls from Lyon with eight boundaries and four sixes.
Australia's decision to not pick a second spinner has now proven to be particularly damaging. Even though Pattinson has done well taking 4-89 from 26 overs, Peter Siddle (0-61) and Mitchell Starc (0-75) have not threatened at any point whatsoever.
Moises Henriques has done a solid job on debut taking 1-48 from 17 overs while Lyon has finished the third day with figures of 3-182 from 40 overs.
India began the third day's play at 3-182 with Tendulkar not out on 71 and Kohli 50 after Australia made 380 on its first innings thanks to 130 from captain Michael Clarke and 68 from debutant Henriques.
Tendulkar and Kohli had combined for a 77-run stand to take India from 3-105 with Vijay (10), Sehwag (two) and Pujara (44) all out bowled by Australian quick Pattinson to be 3-182.
Tendulkar then moved to 81 early on the third day and was on track for his first century in Test cricket since his 146 against South Africa in Cape Town in January 2011.
However, Australia's bowlers were bowling tightly to keep the runs down and eventually Lyon got one to grip and turn sharply, and bowled Tendulkar for 81 with India 4-196.
The 81 is Tendulkar's highest Test score since his 94 against the West Indies in Mumbai in November 2011, but the 39-year-old would be disappointed not to have recorded his 52nd century in his 195th match.
While Australia might have been buoyed by getting rid of Tendulkar, Dhoni quickly made his intentions clear and with Kohli continuing on his way to a century, the match was starting to slip from Australia's gasp.
Even though Lyon picked up the wicket of Kohli for 107 when he attempted one big shot too many, it was Dhoni doing the damage.
Pattinson did pick up his fourth wicket of the innings just before tea when Ravindra Jadeja left a straight ball and was bowled for 16, but India continued on right up until stumps to pile on the runs.
Even though Ashwin fell for three and Harbhajan Singh for 11, Australia wasn’t able to finish the innings on the third day with Dhoni and Kumar combining for an unbeaten stand of 109 up until stumps.