Defending champions USA have crashed out of the Women’s World Cup with a gut-wrenching loss to Sweden in the round of 16, beaten 5-4 on penalties.

Goalkeeper Zecira Musovic was the hero for Sweden, keeping scores deadlocked at 0-0 with a series of brilliant saves as her side were outplayed by the tournament favourites for two hours.

A gripping penalty shootout on Sunday was settled in dramatic circumstances when Lina Hurtig scored a sudden-death winner with Sweden’s seventh spot kick.

Hurtig’s low shot floated upwards after being blocked by Alyssa Naeher, who then swatted the ball away, and the ball was initially ruled not to have crossed the line.

But that decision was overruled after a brief review, with goal-line technology showing the ball just millimetres over the line at a packed AAMI Park in Melbourne.

Three American misses, including one by legend Megan Rapinoe and a crucial shot off the post by Kelley O’Hara before Hurtig’s winner, led to Sweden’s triumph.

It is the first time the US have been beaten before the semi-final stage of a World Cup, while Sweden advance to face Japan in a quarter-final in Auckland on Friday.

“We know what we are capable of,” Musovic said.

“We knew that we were facing a really good team and needed to put in a good performance, which we did.

“I’m extremely proud of the girls and what we managed to do tonight because many people out there didn’t think that was possible.”

US coach Vlatko Andonovski and his top-ranked team had come under intense scrutiny after lacklustre performances in the group stage but came out swinging against world No.3 Sweden.

The Americans dominated possession and had 22 shots at goal, including 11 on target, but Andonovski’s “warriors” could not find a way past the inspired Musovic.

“I’m very proud of them and devastated for them that we have to go out the way that we did,” Andonovski said.

“I thought we deserved a lot more. We deserved to win this game. We created enough to win this game.

“We put up a fight, a battle, we represented this country proudly and showed what we stand for. We did everything right.”

Musovic repeatedly frustrated the likes of Trinity Rodman, Alex Morgan and Lindsey Horan with her stunning performance between the posts.

US captain Horan hit the crossbar with a first-half header and had fans off their seats after the break with a first-time shot that seemed destined for the net.

It was pushed wide by a superb reflex save from Musovic.

Sweden didn’t manage a shot on target until the 85th minute when Sofia Jakobsson fired directly at Alyssa Naeher, who made the only save of the shootout from Rebecka Blomqvist and buried her own spot kick.

Sophia Smith could have won the shootout with the Americans’ fifth spot kick but sent her shot high and wide.