The Scot defied a rankings difference of over 50 places to win the second-round match 6-2, 7-5 in one hour and 34 minutes.
The 26-year-old's gutsy win means she will play in the third round of a grand slam for just the third time in her career after advancing to the last 32 at Melbourne Park in 2005 and at Wimbledon in 2002.
It was also just the fourth win of her career against a top-50 rival and after reaching a career-high ranking of 83 earlier this month – which earned her direct entry to a grand slam for the first time – her victory was earned on the back of 35 winners.
Baltacha claimed her improved form was down to her growing belief after breaking into the top 100 for the first time at the end of last year.
"It's confidence. I used to look back. I used to do that a lot. I'm fed up doing that," she said.
"It's all about looking forwards. I just kept thinking 'you are good enough.'
"I feel fantastic. I knew I had to play well. I had game plan to attack forehand and I think I did that.
"There was a dip at the beginning (of the second set]. I knew the first set was excellent. I knew I could get it back. It was about settling myself again and then going again, which I did."
Baltacha faces the daunting prospect of playing No.2 seed Dinara Safina, who reached the final at Melbourne Park last year in the third round.
Safina beat Czech Barbora Zahlavova-Strycova 6-3, 6-4 in their second-round match today and Baltacha is optimistic about her chances against the Russian.
"Safina is a good player. She has had an injury recently and I'll have nothing to lose," she said.
"I'll have a day off tomorrow and recharge."
Britain's Katie O'Brien, meanwhile, lost out to No.8 seed Jelena Jankovic of Serbia 6-2, 6-2.
In the men's singles, defending champion Rafael Nadal secured a routine 6-2, 6-2, 6-2 win over Lukas Lacko to progress to the third round.
Nadal will play the winner of the match between 27th-seed Philipp Kohlschreiber and Wayne Odesnik in the third round.
Irishman Louk Sorensen showed fighting spirit but ultimately saw his Australian Open fairytale ended by American John Isner.
Sorensen – ranked 287 in the world – became the first Irishman to win a grand slam match in 25 years by beating Yen-Hsun Lu 6-4, 3-6, 6-2, 6-1 in the first round.
However, he faced a taller task in the second round against 6ft 9in American 33rd-seed Isner and was eventually ousted 6-3, 7-6 (7-4), 7-5.