Australia captain Smith, who won the toss and sent New Zealand in to bat on a green Basin Reserve pitch, shook off some recent poor form to reach 71 before he was caught and bowled by Mark Craig.
Khawaja scored his fourth test half century with 57 not out, while Adam Voges (seven not out) was bowled by Doug Bracewell in the final over of the day only to survive because of a contentious no ball.
Television replays showed the delivery was clearly legal.
The tourists had earlier dismissed New Zealand for 183, Josh Hazlewood and Peter Siddle reducing them to 51-5 in the 12th over and Nathan Lyon polishing off the tail after lunch.
Hazlewood finished with 4-42, Siddle took 3-37, while off-spinner Lyon grabbed 3-32 and the tea break was taken 10 minutes early when Trent Boult was caught at long on for 24.
"I thought we bowled really well as a unit," Hazlewood told reporters. "We're in a pretty good position. If we can get another big partnership ... then that will be pretty good."
Craig top-scored with 41 not out but the pitch appeared to have lost much of its bite by the end of New Zealand's innings, which lasted 48 overs.
Tim Southee, however, managed to get rid of both Joe Burns (0) and David Warner (5) to leave the visitors 5-2 in the third over and with the sell-out crowd in full voice.
Southee and Boult kept up the pressure on Smith and Khawaja but when they scored 37 runs, from nine fours and a single, in 16 deliveries, the shackles were broken and crowd silenced.
Smith was eventually dismissed about 20 minutes before stumps when he hit the ball back to Craig to end the 126-run partnership.
"We have lost wickets in clumps on these types of wickets and I think they batted brilliantly," Hazlewood added. "That partnership was very important at that stage of the game."
The crowd began the day celebrating McCullum's milestone as he became just the third New Zealander to earn 100 test caps and the first man in world cricket to achieve them in succession from debut.
Australia, however, seized control of the match shortly after Smith won the toss and simply bowled straight and waited for the ball to do just enough to catch the outside edge.
New Zealand's first seven wickets all fell to catches behind the stumps, but the last three, all Lyon's victims, were caught in front from mis-timed attacking shots.
"We would have liked a few more runs but moving forward the game is very nicely advanced," Craig said. "I think if we had managed to get one or two more wickets at the end it would have been a pretty even day."
(Editing by Nick Mulvenney)
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