Team Penske's Briscoe became the first Australian driver to win the 60-lap race on the 2.8-mile, 14-turn temporary street circuit. He beat Indy 500 winner Scott Dixon of New Zealand by 0.5019 seconds.
"It was definitely special to win here," Briscoe said. "I was getting pressured there at the end with Scott and low fuel. I really feel bad for Will Power. He had a real fast car."
It was the third year in a row that Team Australia's Power, who is from the nearby Queensland state city of Toowoomba, won the pole but failed to finish the race. He clipped the wall, damaging his suspension, then hit the next concrete barrier and was out of the race.
Briscoe, who celebrated by doing a series of doughnuts on the track during the warmdown lap, saw his near two-second lead over Dixon slip to as low as 0.7 seconds with a few laps left as he attempted to conserve fuel.
It was a long time between wins for Team Penske in Australia. The last team driver to win at Surfers Paradise was Emerson Fittipaldi in 1992.
It was Briscoe's third win of the year. He will won on an oval at Milwaukee and on the Mid-Ohio road course.
Power took a 2.9-second lead over Dixon and Briscoe after the first lap, but Briscoe, who started in the second row, chipped away at the lead until a yellow flag on the seventh lap bunched the field.
Briscoe continued to narrow the gap after the green flag came back out before Power hit the wall on Turn 6 on the oceanside backstretch.
While Power heavily criticized Sebastien Bourdais for taking him out of the race in 2006, and he made contact last year with Katherine Legge, this year he had only himself to blame, with no other car causing the accident.
With his suspension gone, he hit the next wall and then drove the damaged car to the back of a tire barrier, where it stayed until the race ended.
"It's a big disappointment, the worst mistake of my career," said Power, who appeared to be close to tears in the pits.
"It's motorsports, but I just can't win at this place. I had such a quick car this weekend ... it was just a bad display."
Dixon thought he had a chance to catch Briscoe over the final 10 laps.
"The traffic at the end made it exciting," said Dixon. "We were quicker in different spots. If he had made a mistake, we could have got him."
Third-place finisher Hunter-Reay, who won here in 2003, has never been out of the top five at Surfers Paradise.
"It was a long day with those curbs," said the American driver. "Unfortunately, I got held up by [Alex] Tagliani for a good while ... but the guys did a great job in the pits to get us by him."
Danica Patrick stalled after trying to avoid an accident, and looked extremely agitated while gesturing to nearby track officials in the jump truck to get her engine started.
Patrick, who had a tough time qualifying and started at the back of the grid Sunday, finished 18th.
Despite some predictions of a major accident on the first-turn chicane involving the field of 24 -- the largest here since 2001 -- there was only a minor skirmish between Mario Moraes and fellow Brazilian Victor Meira.
This Surfers Paradise race was the first under the Indy Racing League banner, and was a non-points event. The IRL and Champ Car World Series, which formerly staged the Surfers Paradise event, unified in February.
"It means almost a million points to me, to win my home race," Briscoe said.
Due to a scheduling conflict, the race is not on the IRL schedule for 2009, although talks are continuing in an effort to have it reinstated.
"I hope we're back here next year," Briscoe said.