The S&P/ASX200 rallied 71.5 points, or 0.84 per cent, to 8,587.2, and the broader All Ordinaries jumped 70.8 points, or 0.81 per cent, to 8,812.7.
US-China trade talks in London buoyed investor sentiment, despite President Donald Trump calling the negotiations "not easy" and with no breakthroughs announced so far.
The top 200 pipped its previous record close set on February 14, but came up short of that day's intraday peak of 8,615.2.
Investors were likely to keep the champagne on ice, as the combination of all-time highs and ongoing uncertainty could leave the bourse in a precarious position if trade talks soured, IG Markets analyst Tony Sycamore said.
"It feels like we could be in a 'buy the rumour, sell the fact' type situation," he told AAP.
"I wish I was able to pinpoint what the consensus expectation is from these talks, but I haven't seen anything anywhere."
The negotiations, which aim to resolve disputes over tariffs, rare earths and technology trade restrictions and student visas, will enter their second day overnight.Â
Ten of 11 local sectors charged higher on Tuesday, as IT stocks (1.6 per cent), consumer discretionary stocks (1.8 per cent) and financials (1.1 per cent) rallied.
Commonwealth Bank continued to defy gravity, breaking $182 for the first time as the financial sector also smashed its record to close with a combined market cap of more than $900 billion.
NAB was the best performer of the big four banks, up 1.5 per cent to $35.17.
Australia's tech sector caught a bid, catching up on two positive sessions from Wall Street's tech-heavy Nasdaq over the long weekend.
WiseTech rallied 2.4 per cent, as accounting software Xero gained 1.8 per cent and data centre play NextDC surged more than five per cent after an update on its Malaysian expansion.
Consumer discretionary stocks pushed higher with strong performances from gambling machine companies Aristocrat (3.6 per cent) and Light & Wonder (3.5 per cent) and after weak consumer sentiment figures helped narrow bets on another Reserve Bank interest rate cut in July.
The glimmers of hope in US-China trade talks helped lift oil prices to two-month highs, assisting energy stocks to lift 0.9 per cent.
Brent crude futures are trading at $US66.78 a barrel.
Coal plays and uranium miners also performed well, with Yancoal rallying four per cent and Paladin Energy surging 3.6 per cent to $6.61 per share.
But materials had a lacklustre day, grinding 0.2 per cent higher as Rio Tinto fell 0.4 per cent to $109.12, while BHP was the best-performing large cap miner with a 0.7 per cent gain.
Gold explorers and miners weighed heavily, as risk-on sentiment led investors to take profits on the safe haven, pushing gold prices lower.
Futures in the precious metal recovered after dipping more than 0.7 per cent during the session to trade at $US3,348 ($A5,142) an ounce.
The Australian dollar is buying 64.97 US cents, up from 64.41 US cents on Friday at 5pm, at the upper end of a six-week range but unable to break above 65.40 US cents.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Tuesday 71.5 points higher, or up 0.84 per cent, to 8,587.2
* The broader All Ordinaries as the broader All Ordinaries gained 70.8 points, or 0.81 per cent, to 8,812.7
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 64.97 US cents, from 64.41 US cents on Friday at 5pm
* 93.93 Japanese yen, from 94.44 Japanese yen
* 57.01 Euro cents, from 57.59 Euro cents
* 48.22 British pence, from 48.61 pence
* 107.69 NZ cents, from 108.74 NZ cents
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