With the encounter played in good spirits, Tomic claimed match point when he dished up a weird trick serve.
While there were no tantrums, the match ended on a controversial note when Tomic clinched the match 6-3 6-4 with an underarm serve between his legs.
To his credit, Kyrgios took the incident in good spirits and grinned as he walked to the net to congratulate Tomic on his win.
Lining up for match point, Tomic was bouncing one ball when he flicked another ball between his legs.
Kyrgios was punished for being unseeded at a grand slam event for the first time in more than three years, striking former Wimbledon finalist Milos Raonic in an explosive first-round match-up at Melbourne Park.
With the Australian Open less than a week from getting underway lets hope the less than impressive showing from Kyrgios isn't a sign of things to come.
In fact, the first shot was completely legal and caught Kyrgios flat-footed as the equally-stunned umpire called game, set and match to Tomic.
With his silky hands in superb touch, Tomic broke for a 3-1 lead and then steamed throught the first set.
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Kyrgios, who was knocked out in the second round at Brisbane last week, was beaten 6-3, 6-4 by friend and fellow comeback candidate Bernard Tomic in an all-Australian battle.
"He won a title previous year and it looks like he is carrying a bit of momentum, which is good to see".
After composing himself, Kyrgios said he was happy to see the 85th-ranked Tomic back in form after missing the Australian Open a year ago when his ranking plummeted.
Now ranked 85, Tomic finished the year in style with an ATP title in China.
"I think it's an exciting time for Australian tennis as we've got such a wide variety of players".
"I guess I just have to raise my game a little bit", the Canberran said. However, Tomic finished the 2018 season on good terms as he won the Chengdu Open file and returned to the top-100.
He said: "I've made third or fourth round many times and lost to the great players of the world so my target is to make another quarter or maybe a semi if I can".