The Spaniard clocked a fastest lap of one minute 31.840 seconds as the cars took to the track for the first time ahead of Sunday’s race.
But it was an unexpected disaster for former world champion Hamilton and Mercedes when his car stopped on his first lap.
Hamilton, who has been tipped by rival drivers as the one to beat this weekend after impressive pre-season testing, sat out the remainder of opening practice, while his teammate Nico Rosberg got in 15 laps for the sixth-best time.
While Mercedes had early teething problems it was promising for Ferrari and McLaren’s Jenson Button, who put in 20-plus laps and finished with the top-two fastest times.
Button was quickest into the final third of the session with 1:32.357 but reported on the McLaren team radio that he lost some time after his fastest lap with locked brakes and overheating rear tyres.
Hamilton had a disastrous start to his preparations when his Mercedes stopped on its first lap, with smoke coming from the rear of the car.
The Briton got out of the car, which was towed back to the team garage in a major setback for the Mercedes team in its first run on the Albert Park circuit since successful pre-season testing.
Hamilton also had the indignity of having his pass checked by security as he returned to the paddock still wearing his race helmet.
Mercedes reported an oil pressure alarm had led to a precautionary shutdown in his car.
Four-time world champion Sebastian Vettel emerged from the team garage for his first stint on the track in his Red Bull with 39 minutes left in the 90-minute opening session.
The German put in 10 laps with a best time of 1:32.793.
His new Australian teammate Daniel Ricciardo had a trouble-free opening spell, getting through 26 laps with the fifth-best time of 1:32.599.
Four other drivers, apart from Hamilton, did not register a time in opening practice — Marcus Ericsson (Caterham), Kamui Kobayashi (Caterham), Pastor Maldonado (Lotus) and Romain Grosjean (Lotus).
There is a second practice session later Friday ahead of Saturday’s qualifying.