Man-of-the-match Sam Burgess had put the hosts 18-14 ahead against holders New Zealand with a try in the 67th minute and they seemed set to hold on to reach next week’s Old Trafford final.
However, after George Burgess conceded a penalty for a high tackle, Kiwi scrum-half Shaun Johnson skipped away from captain Kevin Sinfield’s tackle with just 20 seconds remaining to level.
The scrum-half then held his nerve to slot the winning conversion and leave gutted England players helpless.
It was an awful way to exit the tournament after a terrific effort had put them on the verge of their first World Cup final in 18 years.
Sam Burgess had set up Sean O’Loughlin for the game’s opening try in the 24th minute with Sinfield improving and adding a penalty.
New Zealand came back with the first of winger Roger Tuivasa-Sheck’s brace following a stunning pass from Dean Whare before Johnson added the conversion and a penalty to leave it 8-8 at the break.
Tuivasa-Sheck’s second in the 44th minute was not improved but Johnson added a penalty soon after.
Sinfield’s fine cut-out pass put Leeds Rhinos colleague Kallum Watkins over in the 57th minute though he missed the relatively simple conversion attempt.
England regained the lead when Sinfield converted Burgess’ score after some clever play from the captain but it was not enough as the Kiwis pressed one last time.