Germany may have inflicted a heavy defeat on England but Fabio Capello's men were left to reflect on a controversial refereeing decision when a Frank Lampard shot crossed the goalline.
England's defence looked shaky in Bloemfontein, with Miroslav Klose and Lukas Podolski scoring before Matthew Upson pulled one back with a header.
Then came Lampard's volley, which went off the crossbar and over the line, only for Uruguay official Jorge Larrionda to wave play on.
The second half at Free State Stadium saw Thomas Mueller net twice as Germany sent England home early from South Africa 2010 and booked a place in the quarter-finals.
Bastian Schweinsteiger was passed fit before the game after a thigh injury and he set up the first chance in this thrilling tie.
His ball over the top broke the offside trap and it needed goalkeeper David James to save well with his legs at the near post when Mesut Ozil got his finish away.
Germany legend Franz Beckenbauer has branded England a "kick-and-rush" team earlier in the tournament but the 20th-minute opener from Germany was pure route-one football.
John Terry and Upson clearly were not expecting Manuel Neuer's goal-kick to go so far, with the ball flying over the centre-back pairing. Klose held off Upson before poking his finish past James.
Only James prevented it from Germany putting the game out of England's reach earlier. He saved from Klose after Sami Khedira's flick and Mueller's pass split the back line again.
But Germany were not made to wait long for their second goal. Klose flicked to Muller and he spotted Podolski free to his left, who defied a tight angle to power his finish through James' legs.
It was chaos in the England penalty area, Klose wriggled through feeble challenges from Upson and Gareth Barry and was rescued by another James save.
It needed something to kick-start England and Upson provided it by heading home from Steven Gerrard's cross.
Then came Lampard's "goal", a delightful volley that came off the bar and clearly crossed the line. Even Capello saw it and started celebrating in the dug-out.
Lampard hit the bar again just after the break with a belting 40-yard free-kick as Capello's men looked to take their anger out on Germany.
But England were made to suffer their worst defeat at the finals of the tournament when Mueller fired home twice on the counter-attack.
Germany (4-5-1): Neuer; Boateng, Friedrich, Mertesacker, Lahm; Khedira, Schweinsteiger, Ozil (Kiessling 83), Muller (Trochowski 72), Podolski; Klose (Gomez 72).
Subs (not used): Jansen, Aogo, Tasci, Wiese, Badstuber, Kroos, Marin, Butt.
England (4-4-2): James; Johnson (Wright-Phillips 87), Upson, Terry, A Cole; Milner (J Cole 64), Lampard, Barry, Gerrard; Defoe (Heskey 71), Rooney.
Subs (not used): Green, Hart, Carragher, Warnock, Dawson, King, Lennon, Carrick, Crouch.