With the 6-0, 6-4 victory over Barbora Zahlavova Strycova on Thursday, Williams extended her winning streak to 16 matches at Melbourne Park, where she won back-to-back titles in 2009 and '10 but couldn't play last year due to injury.
Her participation had been in doubt again after she badly sprained her ankle two weeks ago at a warmup tournament, which is why the Rod Laver Arena went silent when Williams fell onto the court in the penultimate rally and sat, watching, as Strycova's shot floated out.
"It's fine. I just have wobbly ankles," she said in a TV interview after the match. "I wasn't meant to be a ballerina or anything."
It was the 500th win on tour, something she'd wanted to achieve since her older sister, Venus, passed the milestone.
"I knew I had to get there too, because I do everything she does," she said. Venus Williams, a seven-time Grand Slam winner with career win-loss record of 598-147 as a pro, is skipping the Australian Open to recover from illness.
Serena Williams now has 500 wins and 104 losses in her career.
After racing through the first set in 22 minutes, her ankle got a good workout in the second set. She was leading 5-2 until the Czech player held and then broke back in the ninth game. After falling behind 40-0 in the last game, Williams won five straight points to avoid another game.
In other action, Milos Raonic of Thornhill, Ont., advanced with a 6-4, 5-7, 6-2, 7-5 win over Germany's Philipp Petzschner.
Raonic was frustrated against the 63rd-ranked Petzschner, as he tried to serve out the victory leading 5-4 in the fourth set, with a line call wide drawing his ire. He went on to lose the game as Petzschner levelled at five games apiece.
But Raonic bounced back and finally won when Petzschner hit a forehand out of bounds after nearly three hours.
In doubles, second seeds Daniel Nestor of Toronto and Max Mirnyi of Belarus earned a comfortable 6-2, 6-2 win over young Australians Benjamin Mitchell and Matt Reid.
Maria Sharapova, one of the other two former champions in the draw, reached the third round after just two hours on court.
The 2008 champion had a 6-0, 6-1 second-round win over U.S. qualifier Jamie Hampton in 64 minutes, two days after beating Argentina's Gisela Dulko by the same margin.
Sharapova did not play in any warmup events and spent nearly two weeks in Melbourne ahead of the season's first major while she rested an injured left ankle.
"It was more about getting my feet going ... worrying about myself," Sharapova said. "Yeah, started my preparations in the off-season a little late, took a bit of extra time in practice instead of rushing into a tournament."
She'll meet No. 30 Angelique Kerber, who beat Stephanie Dubois of Laval,Que., 7-5, 6-1.
Seventh-seeded Vera Zvonareva, a two-time semifinalist at Melbourne Park, had a 6-1, 7-6 (3) over Lucie Hradecka. No. 21 Ana Ivanovic also advanced, beating Dutch player Michaella Krajicek 6-2, 6-3.
Two seeded players were ousted, with Sara Errani beating No. 29 Nadia Petrova 6-2, 6-2 and No. 25 Kaia Kanepi's strong start to the season coming to an end in a 6-2, 7-5 loss to Ekaterina Makarova of Russia.
Defending champion Kim Clijsters is into the third round on the other half of the draw.
Top-ranked Caroline Wozniacki is aiming for her first major tile, and is one of four women in the draw who can finish the tournament at No. 1.
After her 6-1, 7-6 (4) second-round win over Anna Tatishvili on Wednesday, she asked how her boyfriend might be able to help.
She smiled, paused, then relayed some of the advice Rory McIlroy offered that helped him overcome similar pressure and win a golf major.
"Well, it's just about you can't really do anything about the past," Wozniacki said. "You just need to look forward. You have a tournament now, and you want to do the best you can. That's it.
"Then if it goes well, it's great. If not, you have the next one. It's like tennis."
McIlroy was considered a major golf talent on the cusp of a breakthrough when he blew a four-stroke lead and lost last year's Masters. He handled it with such humility that it didn't surprise anyone when he rebounded to win the U.S. Open two months later, when he was 22.
Wozniacki is into a third-round match against No. 31 Monica Niculescu. A win could put her on course for a quarterfinal match against Clijsters, who routed Stephanie Foretz Gacon of France 6-0, 6-1.
Clijsters will face longtime friend Daniela Hantuchova in the third round, and a win there could set up a fourth-round match against French Open champion Li Na, a rematch of the 2011 Australian final.
Third-seeded Victoria Azarenka advanced in a night match with a 6-1, 6-0 win over Australian wild card Casey Dellacqua. Former top-ranked player Jelena Jankovic stayed alive in the draw after beating Chang Kai-chen 6-4, 6-2 and could be a fourth-round rival for Wozniacki.
On the men's side, No. 2 Rafael Nadal advanced without much trouble from his injured right knee or from German veteran Tommy Haas in a 6-4, 6-3, 6-4 win. Four-time champion Roger Federer didn't even need to pick up a racket because Andreas Beck withdrew from their second-round match.
The top-ranked American man bowed out when No. 8 Mardy Fish lost to Alejandro Falla of Colombia 7-6 (4), 6-3, 7-6 (6). But No. 16 John Isner survived a five-setter to beat former Wimbledon finalist David Nalbandian, who was enraged by an umpire who didn't allow him to challenge a disputed line call because he took too long to ask for a review.
No. 7 Tomas Berdych, 2009 U.S. Open champion Juan Martin del Potro and No. 18 Feliciano Lopez all advanced.
Andy Roddick was scheduled to play the last match Thursday against Lleyton Hewitt in a battle between two former No. 1-ranked players. Defending champion Novak Djokovic has an earlier centre court match against Santiago Giraldo. Andy Murray, who has lost the last two Australian Open finals, takes on Edourd Roger-Vasselin.