After recording five double faults to drop the second set, reigning champion Capriati finished the match by winning six straight games to post a 6-2, 3-6, 6-1 victory over Eleni Daniilidou of Greece.
On the men's side, No. 8 Pete Sampras of the United States was taken to the limit by No. 30 Nicolas Escude of France but breezed through the fifth set in 33 minutes to post a 7-6 (7-5), 5-7, 6-4, 6-7 (6-8), 6-3 victory in the evening's final match at Melbourne Park.
After Daniilidou earned her fifth service break of the match in the opening game of the final set, Capriati displayed her determination. The 25-year-old recorded two of her five aces and sped through the frame in just 29 minutes.
Capriati won her first Grand Slam title here last year, knocking off three of the top four seeds on the way to the crown. The Floridian went on to win the French Open and became the ninth women in the history of the computer rankings to earn the title of world No. 1.
"I feel pretty strong, maybe just as strong as last year," Capriati said. "I've just had different opponents and different conditions coming in, and the hip thing. But I still feel physically I'm pretty strong and I can hang in there for another week hopefully."
Capriati played the match with bandages strapped around her injured right hip flexor.
The 19-year-old Daniilidou reached the third round in just her third career Grand Slam event. She made her debut at Wimbledon in June.
Capriati's next opponent is No. 20 Rita Grande. The Italian outlasted No. 16 Iroda Tulyaganova of Uzbekistan, 6-3, 5-7, 6-4.
Meanwhile, Belgians Kim Clijsters and Justine Henin routed their respective Australian opponents. The fourth-seeded Clijsters crushed Cindy Watson, 6-1, 6-2, while sixth seed Henin drubbed Nicole Pratt, 6-4, 6-0.
Clijsters, the runner-up at last year's French Open, will face Janette Husarova in the fourth round. The 27-year-old Slovakian reached the last 16 of a Grand Slam event for the first time with a 6-2, 6-3 upset victory over No. 24 Ai Sugiyama of Japan.
Henin, who also advanced to a Grand Slam final at Wimbledon in 2001, will battle No. 12 Elena Dementieva of Russia, a 6-1, 6-2 winner over No. 23 Magui Serna of Spain.
In other women's action, seventh seed Amelie Mauresmo of France battled through a first-set tiebreak to get past No. 25 Tamarine Tanasugarn of Thailand, 7-6 (7-3), 6-1. The 1999 champion next takes on Germany's Marlene Weingartner, who ousted American Meghann Shaughnessy, the 10th seed, 6-2, 3-6, 6-3.
A former men's No. 1, Sampras fired 33 aces and hit 96 winners to advance to the fourth round here for the the eighth time. With the top five seeds out in the first two rounds, the 30-year-old American stayed on course for a chance to win his first title since 2000 Wimbledon and add to his all-time record of 13 Grand Slam singles titles.
No. 11 Roger Federer of Switzerland took two tiebreaks on his way to a third-round victory. The winner of last week's warmup event at Sydney, Federer recorded his third victory in as many meetings with Rainer Schuettler of Germany, 7-6 (8-6), 7-6 (7-5), 6-4.
The 20-year-old Federer reached the fourth round here for the second straight year and will face another rising star in the men's game, No. 7 Tommy Haas. The German rallied past American Todd Martin, 6-7 (8-10), 6-3, 3-6, 6-4, 6-1.
No. 23 Nicolas Lapentti of Ecuador came from two sets down to reach the fourth round, posting a 4-6, 5-7, 6-4, 6-2, 6-4 triumph over Gaston Gaudio of Argentina.
Chile's Marcelo Rios overcame Spain's Alberto Martin, 6-4, 6-3, 7-6 (7-3), to reach the last 16 for the first time since advancing to the final in 1998.
Lapentti and Rios will contest the all-South American fourth-round match.
In other men's third-round action, Albert Costa upset No. 25 Andrei Pavel of Romania, 7-6 (7-4), 6-4, 6-4, and Wayne Ferreira rallied to beat Ivan Ljubicic, 4-6, 4-6, 7-6 (7-3), 6-3, 7-5. The Spaniard and the South African will square off in one of two fourth-round matches between unseeded opponents.