The benchmark S&P/ASX200 finished down 537.3 points, or 9.7 per cent, to 5,002, eclipsing an 8.3 per cent drop back on October 10, 2008, during the height of the global financial crisis.
The plunge put the index back to levels last seen in April 2016, and came despite the US Federal Reserve dropping its benchmark interest rate to zero in an emergency stimulus measure.
The ASX200 has now lost 30.5 per cent of its value in the three and a half weeks of tumultuous trading since February 20.
The broader All Ordinaries index meanwhile sank 532.5 points, or 9.52 per cent, to 5,058.
"It's just chaos today, isn't it," said IC Markets general manager Nick Twidale.
"Not what we wanted for a nice quiet Monday."
The plunge wiped out hopes that the market had hit bottom on Friday morning, a day that started with the market dropping 8.1 per cent cent only to rebound in the afternoon and close up 4.4 per cent.
Markets seemed to turn around early on Monday morning after the Federal Reserve made its announcement, which also included buying $US700 billion worth of bonds and mortgage-backed securities, with Dow futures pointing to a big drop when the market opened later on Monday.
"You would have hoped that after the Fed cut and cut hard would stimulate global markets, but Australia is a case in point that it hasn't worked that way," Mr Twidale said.
Traders may be wondering if governments know more than they do about how bad the outbreak is, he said.
Six of the ASX's 11 official sectors were down more than 10 per cent, with energy the worst hit, falling 13.5 per cent as Woodside Petroleum plunged 14.4 per cent to a 15-year low of $17.96.
The financial sector was down 11.1 per cent as the big four big banks plunged again, even as the Reserve Bank of Australia moved to give the banking system extra liquidity through its market operations.
NAB dropped 12.4 per cent to $16.12, its lowest level since 1997; ANZ fell 12.5 per cent to a 15-year low of $16.45; Westpac dropped 11.8 per cent to $15.98, its lowest level since 2008; and Commonwealth dropped 10.0 per cent to $59.72, its lowest level since 2012.
CSL fell 10.4 per cent to $281.34 and Cochlear dropped 19.3 per cent to $174.51.
In the heavyweight mining sector, BHP dropped 5.7 per cent to a three-year low of $25.20, while Rio Tinto fell 4.3 per cent to a two-year low of $77.65.
Star Entertainment was the worst hit ASX200 component, falling 23.6 per cent to an all-time low of $2.01.
Just three of the ASX200 were in positive territory, including Telstra, which rose 1.8 per cent to $3.38.
Dreamworld owner and ASX300 component Ardent Leisure plunged 52 per cent to an all-time low of 17.5 cents.
The Aussie dollar meanwhile sank to 60.96 US cents, its lowest level against its US counterpart since 2003.
Just after 5pm AEDT Monday it had rebounded slightly, buying 61.60 US cents, down from 62.98 US cents as the market closed on Friday.
ON THE ASX:
The benchmark S&P/ASX200 index finished Monday down 537.3 points, or 9.7 per cent, at 5,002 points.
The All Ordinaries closed down532.5 points, or 532.5 per cent, at 5,058.2 points.
After 5pm AEDT, the SPI200 futures index was up five points, or 0.1 per cent, at 5,053 points.
CURRENCY SNAPSHOT:
One Australian dollar buys:
61.59 US cents, from 62.98 US cents on Friday
65.46 Japanese yen, from 66.42 yen
55.32 euro cents, from 56.24 cents
49.87 British pence, from 50.15 pence
101.97 NZ cents, from 102.71 cents.
Australian Associated Press
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