India finished with 572 and a lead of 192 after the home side resumed overnight into the fourth day at 8-515, in reply to Australia's first innings 380.
And then first innings seven-wcket hero Ravi Ashwin struck crucial killer blows with vicious bounce and spin to send openers Shane Watson and Ed Cowan packing.
Almost an hour into the afternoon session Austalia was stumbing at 3-66, with Dave Warner on 12 and first-innings century-maker Michael Clarke yet to score.
Australia still trailed by 126 runs overall.
Watson was out on the last ball of the morning session on the brink of lunch while Cowan and Hughes went in the space of six deliveries almost at drinks in the middle of the second session.
Cowan fell to a contentious leg-before-wicket call while Hughes copped a spiteful lifter from left-armer Ravi Jedeja.
Of significant concern to Australia's hope of survival and building a handsome lead to avoid losing this opening Test, was the pronounce spin and alarming bounce the home spinners were extracting from substantial rough around the touring batsmen.
Lyon was hammered for 215 from 47 overs with just three wickets on a spin-friendly dust-bowl pitch and Inida captain Mahendra Singh Donhi completing his record innings of 224.
The power-hitting right-hander smacked 24 fours and six sixes giving the home side an imposing first-innings lead with 74 overs remaining in the day.
Big paceman James Pattinson was far and away Australia's most effective bowler with 5-96, but the lack of penetration from the Aussies only spinner presents a selection dilemma before the remaining three Tests of the four-game series.
Lyon's figures were the equal-second highest tally in an innings for an Australia bowler in Test history.
Warner was unable to take his opening spot and Watson had elevated back to where he prefers to bat anyway.
But the big right-hander copped a nasty, lifting delievery from Ashwin's last ball before lunch.
Dhoni resumed at 206 with an aggressive mindset, jumping down the pitch and lifting a delivery from Lyon over the sightscreen in the third over of the day.
His record-breaking innings came to an end with his nation in a commanding position from the biggest innings ever played by an Indian captain.
It was the unflappable Dhoni's first double century and his fifth ton from 73 appearances at the highest level.
It was the Indian skipper's first century against Australia.
Pattinson extracted some bounce from the spin-friendly pitch and Dhoni was caught behind attempting a hook shot, ending a six-hour stay of cross-bat slogs and captivating lofted drives.
Dhoni's partnership of 140 with debutant tailender Bhuvehswar Kumar is the first century stand for India against Australia for the ninth wicket.
Kumar was last man out for 38 to pace bowler Peter Siddle (1-66) while fellow frontline quick Mitchell Starc was wicket-less from 25 overs.
Dhoni had shared a 128-run stand for the fifth wicket with Virat Kohli (107) after Australia had been in a strong position with India 4-196 when Sachin Tendulkar was bowled by Lyon for 81.