An Aboriginal dreaming story about a star crashing to Earth with a noise like thunder has led to the discovery of an ancient meteorite crater in central Australia.

A Sydney astronomer, Duane Hamacher, found the bowl-shaped crater in Palm Valley, about 130 kilometres south-west of Alice Springs, by searching on Google Earth.

He was inspired to look there after learning of traditional stories told by the local Arrernte people about a star that had fallen into a waterhole called Puka in the valley.

Mr Hamacher, a PhD candidate at Macquarie University, said that reality matching the Dreaming story could be a case of pure chance.

''But if so, it's an incredible coincidence,'' he said.

He is part of a team, led by a CSIRO astronomer, Ray Norris, that is exploring the possibility that Aborigines were the world's first astronomers.

Traditional Aboriginal wisdom about the heavens was impressive, Mr Hamacher said.

''It is impossible to survive on a continent like this for 50,000 years and not have an intimate knowledge of the natural world around you, including the night sky,'' he said.

He searched historical records for Aboriginal stories with references to comets, meteors and cosmic impacts, and looked for matching astronomical events.

The Palm Valley crater, which the team proposes to name Puka, was probably formed millions of years ago, so people could not have witnessed this impact.

''But perhaps the Arrernte knew rocks fell out of the sky and maybe they deduced that a large rock caused the big bowl-shaped crater,'' he said.

Another Arrernte Dreaming about a large impact crater called Gosse's Bluff, which formed about 142 million years ago, ''closely parallels the scientific explanation'', he said.

The crater, about 175 kilometres west of Alice Springs, is known as Tnorala and considered a sacred place by the Western Arrernte people, who say it was formed when a group of sky-women were dancing as stars in the Milky Way.

One woman who grew tired placed her baby in a wooden basket, but it fell to Earth, ''forcing the rocks upward'' into the crater's circular mountain range.

After spotting the Palm Valley crater on the internet, Mr Hamacher visited the site with two Macquarie University geophysicists, Craig O'Neill and Andrew Buchel, and an astrophysicist, Tui Britton.

''We found evidence of shocked quartz, which is only produced when there is a substantial impact,'' Mr Hamacher said.

They also determined that the structure was bowl shaped under the surface, which could not be explained by erosion.