(CNN) -- Pakistan are in a strong position to claim their first Test victory over Australia in 14 years with the hosts only 80 runs ahead with just two second innings wickets remaining at stumps on day three in Sydney.
Australia, who had a first innings deficit of 204 runs, fought hard to reach 286 for eight wickets with Mike Hussey unbeaten on 73 and Peter Siddle on 10.
The pair have put on 29 for the ninth wicket and have given Ricky Ponting's men just a glimmer of hope of pulling off an unlikely victory of their own.
Leg spinner Danish Kaneria with four for 117 has led the Pakistan attack, claiming Marcus North, Brad Haddin and Mitchell Johnson after tea as Australia lost five wickets for 87 runs in the final session of the day.
But Kaneria left the field with severe cramp in his leg late in the day and the tourists will hope he is fit to bowl on Wednesday as they bid to claim victory to level the series.
Kaneria was the last man out at the start of the day, with Pakistan adding just two to their overnight total to be dismissed for 333 with Doug Bollinger taking four wickets for 72.
Shane Watson and Phillip Hughes helped Australia to 86 without loss at lunch, but Pakistan had the better of the afternoon session as they removed both openers and Ponting.
Hughes made 37, but Watson was denied a second century in successive Tests as he fell for 97 gloving a ball from Umar Gul to Faisal Iqbal at second slip.
Despite his disappointment, all-rounder Watson remained confident they could still turn it around.
"I definitely think we're still in it," he told reporters at the close of play.
"Best case scenario I reckon 150 would be a target, and if everything goes well and we bowl well there's a chance we could give ourselves an opportunity to win the game."
Australia collapsed for 127 on the first day at the SCG, with Mohammad Asif taking six wickets, to put themselves on the backfoot after thrashing Pakistan in the opening Test of the series in Melbourne.
The third Test is in Hobart, Tasmania.