The central bank said the rate cut was especially appropriate given recent tepid economic data as well as slowing growth in China, Australia's largest trading partner.
"The RBA cut interest rates by 25 basis points that wasn't a great surprise. I think one of the most interesting things the statement seems a little less dovish than previous statements as they didn't explicitly indicate that the inflation outlook provided them with scope for further easing from here," said Paul Bloxham, chief Australia and New Zealand economist at HSBC.
(Read more: Gold miners: we aren't in 'dire straits')
Banks were broadly lower following the announcement. Westpac and Macquarie fell 0.7 percent each.
In earnings news, hearing implant maker Cochlear rallied 1.5 percent after it's full-year results matched analyst expectations while engineering firm Downer lost half a percent despite reporting an 80 percent increase in net profit.
Japan's benchmark index staged a turnaround to close at a session high after hitting a five-day low earlier in the session as dollar-yen rose above the 98 handle in afternoon trade, reversing earlier losses in exporter stocks.
Shares of Sony tanked nearly 5 percent after the firm's board rejected activist investor Daniel Loeb's call to spin off its entertainment business.
"I think there's a lot of value in the stock and I would recommend investors buy it on this current dip today. I do believe the CEO is a doing a decent job in turning around the business and investors buying today are likely going to get a pretty decent returns going forward," said King Lip, CIO at Baker Avenue Asset Management.
Toshiba shares jumped 1.4 percent after the Nikkei newspaper reported that the firm may enter a joint venture project with Sandisk to build a flash memory chip maker with total investment estimated at $3.9 billion.
(Read more: Sales tax hike will hurt Japan but must happen: IMF)
Tokyo Electric Power rallied over 3 percent even after the country's nuclear watchdog announced that highly radioactive water from its Fukushima nuclear plant has seeped into the ocean.