The nation still held strictly to the White Australia policy despite the desperate needs of the war, leading to segregation in poor conditions and discrimination that later sparked riots between black and white GIs in Brisbane.
The 96th Battalion, like all other black units, was recruited and deployed under segregation policies applied across the US military until the late 1940s, and reinforced by rules governing the stationing of more than 7000 black troops in Australia.
Few blacks were assigned combat roles. Most were in support duties, mainly catering and labour.
The 1200-strong 96th Battalion, and another black engineer unit, the 91st Battalion, were commanded by whites.
The military history website Australia@war says the units had been recruited and organised as "supplemental labour", with no specialist training or equipment. They had relatively few officers for their large companies, creating management and disciplinary problems.
This helped inflame tensions in Townsville, a key staging post for the Pacific war that hosted more than 50,000 US and Australian troops. It is still a base for the Australian Army.
Trouble erupted shortly after the battalion's arrival, when about 100 of the unit's troops fought with Marines who had rounded them up with bayonets and loaded rifles. The black GIs were banned from town.
Amid plummeting morale, half the battalion were deployed to New Guinea. The remaining two companies were based at what is now the Townsville suburb of Kelso, building by hand three 2100m airfields.
Australia@war says that on the night of May 9, 1942, shots were heard in the battalion's camp. Local Arthur Kelso, out riding on his Laudham Park property, said he heard continued shooting - including Thompson submachine guns - until about 11pm.
Some reports suggested violence flared after a white officer struck one of his black subordinates, and that drunken blacks began shooting at their officers, who returned fire.
As reports of 250 rampaging soldiers reached Townsville, Australian units issued with live ammunition and Bren light machine guns were sent to cordon off the mutineers. They were stopped and turned back to camp.
The incident was reported in the war diaries of the 29th Australian Infantry Brigade and the 51st Infantry Battalion, noting that 500 US engineering troops were "in revolt", and that "US negroes had seized their own arms".
Later, a Brisbane-based engineer, Lieutenant Frank Beasecker, wrote in his diary: "The 96th Engineers, a negro battalion, had a mutiny a few months back and expended 30,000 rounds of machine gun ammo. Luckily no one was hurt but they were after the white officers."
In contrast to Beasecker's report, Australia@war says Kelso reported that 19 coffins had been ordered to bury the dead.
Now James Cook University historian Ray Holyoak has uncovered evidence of the mutiny during research into Congressman (later President) Lyndon B. Johnson's sudden and unexplained visit to Townsville in 1942.
He told ABC radio yesterday he had found primary documentation to prove that the 96th Battalion did mutiny in an eight-hour siege triggered by racial taunts and violence.
"After some serial abuse by two white US officers, there were several ringleaders and they decided to machine-gun the tents of the white officers," Holyoak said.
The evidence is contained in documents held in the archives of the Queensland police and Townsville Army Brigade detailing the firing of more than 700 rounds by machine gun and antiaircraft weapons into tents where white officers were drinking.
Holyoak said at least one man was killed and dozens severely injured.
He said further evidence was provided by an unpublished report written by US war correspondent Robert Sherrod, which was given to Johnson and later filed by the US National Archives and Records Administration.
"I think at the time, it was certainly suppressed," Holyoak said.
Divided loyalties: wartime conflict between blacks and whites
* The 1917 Camp Logan, Houston, Texas, mutiny by 156 soldiers of the all-black 24th US Infantry's 3rd Battalion, in which four soldiers and 16 civilians died. Nineteen mutineers were hanged, and 41 jailed for life.
* Port Chicago, July 1944, when black sailors refused to load ammunition ships after 320 others had been killed in a huge explosion. Loading ammunition was exclusively a black job, and the blast was triggered when white officers pressured their men to hurry. Fifty men were convicted of mutiny and given terms of up to 15 years' hard labour.
* Race riot at Agana, Guam, December 1944, after taunts, violence and discrimination, the fatal shooting of a black GI by drunk white Marines and the peppering of the black camp by other Marines in a jeep. Black GIs returned fire, injuring a white MP. Black GIs were jailed. No whites were charged.
* The Freeman Air Force Field Mutiny, Indiana, 1945. More than 160 black officers were arrested after trying to forcibly integrate an all-white officers' club. Only one was convicted in an incident regarded as a catalyst for the later integration of the US military.
