The opening batsman led the Indian charge after captain Virat Kohli won the toss and batted -- a decision he said was a "no-brainer" given the sunny conditions in south London.
Kohli also came out all guns blazing to smash 82 and combine with Hardik Pandya for a 81-run third-wicket stand that saw the pair pummel world champions Australia's bowlers.
The left-handed Dhawan made 117 off 109 balls and shared an opening stand of 127 with Rohit Sharma (57) that set the tone for the innings.
India's total meant Australia were left needing to surpass Ireland's 329 for seven against England in 2011, the highest score by any team batting second to win a World Cup match.
- 'Smart and calm' -
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"I played it very smartly and calmly. I really enjoy playing on this ground," said Dhawan during the innings break after his third one-day international hundred in five innings at the Oval.
"I feel it is enough runs on the board. We have a great bowling side and I'm sure with their experience we will trouble the Australian batsman."
Dhawan and Sharma overcame a cautious start against Australia's new-ball duo of Pat Cummins and Mitchell Starc to put India in control with their 16th century partnership in one-day internationals.
Paceman Nathan Coulter-Nile finally struck in the 23rd over, having Sharma caught behind, with both Australia and India looking to extend unbeaten records at this year's World Cup.
It was a first wicket of the World Cup for Coulter-Nile, who feared he might be dropped despite a match-winning 92 with the bat in Australia's narrow win over the West Indies last time out.
Dhawan carried on, however, to reach a hundred with a single of Marcus Stoinis after the ball rebounded off the stumps.
He acknowledged his 17th ODI century by taking off his helmet and waving his bat to huge cheers from a largely India-supporting crowd.
The aggressive Dhawan then drove a 93 mph delivery from Starc straight past the left-arm quick's head for four.
But Starc eventually had Dhawan caught at deep midwicket to end an innings featuring 16 boundaries
Kohli, out for 18 in India's opening win against South Africa, then took as all-rounder Pandya, pushed up the order, provided superb support for his skipper.
Kohli registered his 50th fifty at this level in an already illustrious career that has taken him to the top of the batting standings in both Test and ODI cricket.
Pandya, who was dropped first ball by wicket-keeper Alex Carey, made the most of his reprieve to hit 48 runs off just 27 deliveries before falling to Cummins.
MS Dhoni also chipped in with a brisk 27 as India scored 59 runs from the last five overs.
Stoinis took the wickets of Dhoni and Kohli in the last over but KL Rahul finished off the innings with a boundary.