Australia led the tourists by 237 runs with seven wickets in hand at close of play on the third day at the Melbourne Cricket Ground.
Warne, who tormented the English batsmen during Australia's decisive victory in last month's first test, once again dashed the tourists' hopes.
After taking three wickets on Monday, Warne doubled his tally by removing Alec Stewart, wicketkeeper Steve Rhodes and seamer Phil DeFreitas to finish with figures of six for 64 from 27.4 overs.
Resuming at 148 for four in reply to Australia's first innings 279, England collapsed to 212 all out, losing their last six wickets for the addition of 64 runs.
They endured the worst possible start when Graham Gooch lofted the first ball of the day straight back to fast bowler Craig McDermott.
Australia, leading by 67 runs on first innings, consolidated their advantage by reaching 170 for three at the close. Number three batsman David Boon was on 64 in partnership with Michael Bevan, who was three not out.
With two days remaining and the pitch expected to deteriorate further, England faces a grim battle to save the match.
England captain Mike Atherton will be looking for his players to follow the example of opener Alec Stewart, who returned to the crease on Tuesday despite suffering a broken right index finger.
Stewart, also the reserve wicketkeeper, suffered the fracture when he was hit by a lifting McDermott delivery on Monday. He made 16 on Tuesday before skying a return catch to Warne.
Stewart will miss the third test starting in Sydney on Jan. 1.
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Peter May, one of England's finest postwar batsmen and test captain a record 41 times, died peacefully at his hom Tuesday after a short illness. May would have been 65 on New Year's Eve.
In his first-class career for Surrey and England, from 1948-63, he totaled 27,592 runs -- including 85 centuries -- at an average of 51.00.
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