The competition was made up of a triple round robin league stage before a championship playoff featuring the top four teams.
Of the eight participants, four came from the National Soccer League (1977–2004): Perth Glory (established 1995), New Zealand Knights (1999), Newcastle Jets (2000) and Adelaide United (2003).
New Zealand Knights had previously entered the NSL as the Auckland Football Kingz, but were significantly restructured and have a vastly different playing roster.
The first A-League Grand Final took place on 5 March 2006, with Sydney FC becoming the league's inaugural Champions, defeating the Central Coast Mariners 1–0.
Commentators did not give much weight to the competition as a guide for performance during the season proper, as injuries or club strategic policy ruled that many teams did not use their best players and often used experimental tactics.
Although Australia became a member of the Asian Football Confederation in 2006, Australian teams were not invited to participate in the 2006 AFC Champions League competition.