Shannon Boxx, Carli Lloyd and Tobin Heath all failed to convert for the Americans, who squandered dozens of chances throughout the game and blew a lead just six minutes from winning their third World Cup title.
"This is obviously going to hurt for a while," said Abby Wambach, whose only hole in her glittering career is the World Cup title.
Japan had not beaten the Americans in their first 25 meetings, including a pair of 2-0 losses in warm-up games a month before the World Cup. But the Nadeshiko played inspired throughout the tournament, hoping their success could provide an emotional lift to their nation, still reeling from the March 11 earthquake and tsunami.
After being presented with the gold trophy, Japan's players jumped up and down on the podium, then gathered behind a sign reading "Champions. World Champions."
"Not one of the players gave up," said coach Norio Sasaki, who inspired his players before a quarterfinal by showing them pictures of the devastation. "The penalty kicks are always a 50-50 percent chance."
It's been 12 years since the United States has won the World Cup, and this team was certain they were the ones to break the drought. They'd needed to beat Italy in a two-game playoff just to get into the World Cup, then lost two games in a three-month span, an uncharacteristic "bad streak" for the U.S.
After easy wins in their first two games in Germany, the Americans lost to Sweden - their first loss ever in World Cup group play.
But they rallied with one of the most riveting finishes ever in a World Cup game - men's or women's - against Brazil in the quarterfinals. Down a player for almost an hour and on the verge of making their earliest exit ever from a major tournament, Abby Wambach's magnificent, leaping header in the 122nd minute tied the game.
The Americans beat Brazil on penalty kicks and, just like that, a nation was hooked.
Hollywood celebrities, pro athletes, even folks who don't know a bicycle kick from a Schwinn were captivated by the U.S. women and charmed by their grit and can-do attitude that is uniquely - proudly - American. Even President Barack Obama was a fan, taking to Twitter himself on Sunday morning to wish the team well.
"Sorry I can't be there to see you play, but I'll be cheering you on from here. Let's go. - BO."
The White House later released a photo of Obama and his family watching the game.
But the Americans lost this game as much as Japan won it.
"Evidently, it wasn't meant to be," Wambach said.
They'd taken the lead in the 104th minute off a header by Wambach. Alex Morgan, who scored the first American goal, came up with a blocked cross and sent it to Wambach, who was camped in front of the goal on the 6-yard line. Standing a head taller - and then some - from defenders on either side of her, she needed only to nod the ball into the net.
But Homare Sawa flicked in a corner kick in the 117th minute - earned after 36-year-old captain Christie Rampone raced to clear Yukari Kinga's chip over Hope Solo off the line. It was the fifth goal of the tournament for Sawa, playing in her fifth World Cup.
Japan had already scored late in regulation to force extra time.
"We ran and ran," Sawa said. "We were exhausted, but we kept running."
The Americans got one last chance when Morgan was floored by Azusa Iwashimizu just outside the area in the 121st minute. Lloyd, Boxx and Heather O'Reilly huddled behind the ball before O'Reilly tipped it to Lloyd. But Lloyd's shot was well wide, and Heath couldn't make anything happen with the rebound.
After beating Brazil on penalty kicks in a quarterfinal, the Americans just didn't have the same touch Sunday.
"You don't; you can't," U.S. coach Pia Sundhage said when asked to explain it. "Sometimes in, sometimes out."
Boxx went first, and her shot banged off Ayumi Kaihori's right leg. After Aya Miyama made hers, wrong-footing Solo, Lloyd stepped up and sent her shot soaring over the crossbar. As the crowd gasped, Lloyd covered her mouth in dismay. Solo saved Japan's next shot, but Kaihori made an impressive two-handed save on Heath's shot.
Solo came up with a save, and Wambach buried hers. But Japan need to make just one more, and Saki Kumagai did.
"It's tough to do two rounds of penalties," Wambach said. "The keeper knows in a lot of ways where we're going to go. She made some great saves."
It never should have gotten that far. The Americans finished the first half with a 12-5 shot advantage but had just one attempt on target. Lauren Cheney came up short three times, Wambach shook the crossbar and Megan Rapinoe banged one off the near post.
The Americans finally broke through in the second half, with Morgan scoring her second goal of the tournament in the 69th. Rapinoe booted a pass that traveled almost half the length of the field and Morgan, who replaced the injured Lauren Cheney at halftime, beat three defenders to catch up to it. She shook Kumagai, touched the ball once with her right foot, stutter-stepped and then delivered a left-footed blast from 17 yards that Kaihori had no chance at stopping.
The Americans raced over to Morgan for a group bearhug while chants of "U-S-A! U-S-A!" echoed through the stadium.
But with just nine minutes or so before they could claim the title, the Americans gifted Japan a goal. Rachel Buehler tied to clear the ball right in front of the goal and knocked it to Ali Krieger, who botched her clearance, too. The ball fell to Miyama, who poked it in from five yards to tie it.