Australian batsman Steve Smith has been ruled out of the third Ashes Test against England in Adelaide due to illness.

Usman Khawaja replaces Smith, who captained Australia for the first two Tests.

Smith's absence was confirmed by returning captain Pat Cummins at the coin toss, which Australia won and chose to bat first, in the 30 minutes before play started.

"Steve's been feeling a little bit unwell the last couple of days. He came and gave it a crack this morning but didn't think he was going to be up for this one," said Cummins.

"So he's headed off home but pretty lucky we've got someone like Usman who can step right in. He's going to bat four."

A statement from Cricket Australia confirmed Smith was suffering from a "potential vestibular issue", indicating problems with balance.

"Over the past few days he has been feeling unwell, with symptoms including nausea and dizziness," read the statement.

"He was assessed and monitored closely and was close to being available to play. However, given the persistence of symptoms, a decision was made not to proceed.

"He is being treated for a potential vestibular issue. This is something Steve has experienced intermittently in the past and is being managed accordingly.

"He is expected to be available for the Boxing Day test in Melbourne."

Smith led Australia to eight-wicket wins in Perth and Brisbane in the absence of regular skipper Cummins. He hit the winning runs in Brisbane as Australia took a 2-0 lead in the five-match series.

Veteran Khawaja, who turns 39 on Thursday, was originally left out despite declaring himself 100 per cent fit after missing the second Test with back spasms that he sustained in the opening game, raising the prospect that he may have played his final match for his country.

Khawaja has been unable to break up the opening partnership between Jake Weatherald and Travis Head, with that duo sharing 70-plus stands in both Perth and Brisbane.

England must win the third Test at the Adelaide Oval to have any chance of regaining the Ashes over the remainder of the series.

At Wednesday's Test, Australia and England players wore black armbands following Sunday's shooting at Sydney's Bondi Beach.

Fifteen people were killed and many others injured after gunmen opened fire at a Hanukkah celebration to mark the start of the Jewish holiday.

Flags were flying at half-mast at the Adelaide Oval, while Australian folk singer John Williamson performed his 1982 hit True Blue on the opening morning after a moment's silence was observed.

Australia lead five-match series 2-0