Named at inside centre, Farrell was tipped to return from injury as skipper but coach Eddie Jones has instead opted for Lawes, who led the team through the Six Nations.
It's the first time since 2018 that Farrell has been overlooked as captain.
Farrell suffered injuries to both ankles which ruled him out of the entire Six Nations campaign with his last Test coming against Australia in November 2021, helping pilot the hosts to a 32-15 win.
He will line up between exciting young five-eighth Marcus Smith and outside centre Joe Marchant, while veteran Danny Care will start at halfback.
Care hasn't played for England since 2018.
Tom Curry is open-side flanker while No.8 Billy Vunipola makes his first appearance for England since early 2021.
In the front row hooker Jamie George joins props Ellis Genge and Will Stuart, while Maro Itoje and Jonny Hill are locks.
Three players could make their England debuts after being named on the bench - Australian-born centre Guy Porter, halfback Jack van Poortvliet and teenage fullback Henry Arundell.
"Picking the 23 out of this group of 36 was difficult," said Jones.
"We feel we have a well-balanced team which is ready for this improving Australia team.
"We'll take it to them from the start."