Dwyer, who guided Australia to their maiden World Cup triumph in 1991, told The Australian newspaper the Lions were cheating at the scrum, the breakdown and in loose play.
The comments are certain to ignite tensions between the Warren Gatland-coached Lions and the Wallabies ahead of their three-match series starting with the first Test in Brisbane on June 22.
"We have a great game and there is massive scope for playing attractive rugby," Dwyer said in comments published on Saturday, hours before the Lions play the New South Wales Waratahs in Sydney.
"It's not supposed to be a contest to see who can cheat the best. It's who can play the best.
"One comment I'd like to make after having seen the Lions in action on tour is that it doesn't come as any surprise they're coached by a New Zealander because they play outside the laws of the game as every New Zealand side does."
Dwyer, 72, has long accused New Zealand teams of cheating, and in recent years has criticised captain Richie McCaw and the All Blacks forwards for using negative tactics and duping a succession of referees.
On Saturday, however, he failed to mention the Wallabies are also coached by a New Zealander, Robbie Deans, who was a long-term coach of McCaw at the Canterbury Crusaders before he took the Australia job in 2008.
Dwyer added the Lions forwards were illegally pushing upwards in the scrum to dislodge the opposing teams' hookers and win penalties and their props were binding illegally and putting their hand on the ground for extra stability.
"When they put the delayed shove on, they scrummage upwards so there is nowhere for the opposing hooker to go but up," he said.
"The thinking seems to be that if you can get a penalty so easily, why not do it?
" Lions players were also infringing at the breakdown, by going to ground to hold up the ball, while impeding opposing players arriving at the tackle area.
"They power past the ball by a metre and a half and then they hold on to defenders' jerseys," Dwyer added.
Further Dwyer complaints included the tourists screening their team-mates going to receive kicks, and their decoy runners illegally making contact with opposing defenders to impede them.
"When they run decoy plays, the decoy runner invariably makes contact with the defender. He doesn't smash him out of the way or anything so blatant, but it has the effect of impeding the defence," Dwyer said.
"You don't have to be smart to cheat," he said.
"You just have to be a cheat."
- Sports & Recreation