(Portugal go through 6-5 on penalties)
Portugal reached the semi-finals with a 6-5 penalty shoot-out win over England.
David Beckham fired Englands first one over, and though Rui Costa missed soon after, keeper Ricardo saved from Darius Vassell then scored the winner himself.
Michael Owen put England ahead after a Costinha error, but Helder Postiga made it 1-1 before Sol Campbell had a 90th- minute goal controversially ruled out.
Rui Costas extra-time scorcher put the hosts ahead, but Frank Lampard turned sharply and scored to force penalties.
However, the shoot-out went the way of the hosts, leaving England to go out of a major tournament on penalties for the fourth time.
Yet the defeat came after England had made the dream start to their quarter-final in Lisbon.
Not only did England fans commendably respect the Portuguese national anthem, Owen responded to his critics in the most emphatic fashion.
David James launched a massive clearance upfield which Costinha attempted to cut out but contrived to head backwards into the path of Owen.
The England striker displayed all his predatory instincts, allowing the ball to drop before brilliantly flicking the ball past Ricardo with only three minutes gone.
Michael Owen puts England in front with a flicked shot
Substitute Helder Postiga equalises for Portugal with a header
Owen heads on to the bar, before Campbell bundles in the rebound only for his effort to be disallowed
Game goes into second period of extra time
Rui Costa scores with a brilliant strike for Portugal
Frank Lampard equalises for England
The goal galvanised Owen, who became the first England player to score in four consecutive international tournaments - beating Geoff Hursts record.
The swiftness of Englands opener meant it was unlikely that the game would settle down and Portugal pressed for the equaliser.
Sven-Goran Erikssons men made life difficult for themselves by giving away possession regularly, with Paul Scholes and Lampard guilty of failing to make the simple pass.
Luis Figo wriggled past Gary Neville in defence and his cross found Cristiano Ronaldo, who saw his shot blocked by a combination of the superb Ashley Cole and Sol Campbell.
Beckham then failed to cut out a pass to Figo, allowing Deco to feed the ball to Maniche who sent a rasping drive goalwards which James expertly tipped over for a corner.
Campbell almost doubled Englands advantage on 20 minutes when he headed a Gary Neville cross just over the bar.
England needed to get a grip on proceedings, but they were dealt a blow when Wayne Rooney, their talisman, was forced off midway through the first half after being struck on the foot.
Rooneys mere presence had preoccupied the Portugal defence to such an extent that they were leaving Owen unmarked.
Englands goalscorer twice went close to adding to his tally, first lobbing just over Ricardo and then forcing the goalkeeper into a fine save with a snap shot on the edge of the area.
Vassell replaced Rooney, but it was not Englands attack that was giving cause for concern it was their defence.
Time and again they failed to close down Portugal and England were lucky to go into the break with their lead in tact.
Shortly after the interval, Eriksson replaced the ineffective Scholes with Phil Neville to nullify playmaker Deco.
But Portugal continued to pose a threat and Luiz Felipe Scolari brought on the attack-minded Simao in the place of holding midfielder Costinha.
And Simao signalled his intent, whipping in a shot within minutes of entering the fray.
Figo forced an excellent save from James low to his right and won a corner only to be substituted with Postiga coming on in his place.
The Portugal captain sloped off down the tunnel, but Scolaris two substitutions proved inspired as they combined late on to grab the hosts an equaliser.
Englands defence failed to clear Simaos initial cross and his second was met by Postigas head, the ball flying past James.
It was no less than Portugal deserved for the constant second-half pressure.
But back came England and they thought they had won the match with a minute left when Campbell bundled home a Beckham free-kick after Owen had initially struck the crossbar.
However, referee Urs Meier deemed that John Terry had impeded Ricardo and awarded Portugal a free-kick.
Both teams looked tired going into extra time, and Englands defence was called into some desperate last-ditch defending to keep Portugal at bay.
The exemplary Cole made a brilliant goalline clearance to deny Portugal, but there was nothing Englands defence could do about Portugals second.
Costa fired an inexorable strike that crashed in off the crossbar to leave James with no chance.
All wins are delicious, but this one - especially after everything that happened - was spectacularLuiz Felipe Scolari
But England simply refused to yield to the hosts and Lampard equalised from close range after Terry had headed down Beckhams corner.
The game went to penalties, which once more proved Englands downfall, with Beckham firing over the crossbar after he seemed to lose his footing on the sandy surface.
The England captain looked at the penalty spot in disbelief, while Vassell struck his spot-kick low to the keepers left, but Ricardo made a fine save.
Goalkeeper Ricardo then stepped forward himself to score the winning spot-kick and send the Portuguese fans wild.
England, meanwhile, were left to reflect on another evening of hurt as their quest for international honours stays unfulfilled.
Portugal:Ricardo, Miguel (Rui Costa 79), Andrade, Ricardo Carvalho, Nuno Valente, Maniche, Costinha (Simao 63), Deco, Figo (Postiga 75), Nuno Gomes, Ronaldo.
Subs Not Used: Quim, Moreira, Paulo Ferreira, Rui Jorge, Couto, Petit, Beto, Tiago.
Booked:Costinha, Deco, Ricardo Carvalho.
England:James, Gary Neville, Terry, Campbell, Ashley Cole, Beckham, Lampard, Gerrard (Hargreaves 81), Scholes (Phil Neville 57), Owen, Rooney (Vassell 27).
Subs Not Used: Robinson, Walker, Bridge, Carragher, Butt, Joe Cole, Dyer, Heskey.
Booked:Gerrard, Gary Neville, Phil Neville.
TRIVIAPortugal have reached the semi-finals of the European Championships for the third time in history and the second time in succession. On both previous occasions (1984 & 2000), Portugal were eliminated in the semi-finals by France.This was the 10th time in history a European Championship match was decided in a penalty shoot-out. For England it was the second failure on three occasions.Portugal are only the second country at the European Championships to miss a penalty during a deciding shoot-out and still progress to the next round. The first country to do this was Italy in their semi-final at Euro 2000 (against the Netherlands).The opening goal scored by Michael Owen after two minutes and 24 seconds is the fourth fastest goal ever recorded at the European Championships. Owen now has scored 26 career goals for England which brings him into the Top 10 of all-time top scorers for England. All-time top scorer remains Bobby Charlton with 49 international goals for England.
GLORY FOR GREECEReport: Portugal 0-1 GreeceGreece reactionPortugal reaction
Greece complete fairytaleAlan Hansens viewPlayer ratings
TOURNAMENT REVIEWA fitting finaleThe highs and lowsBest goals of the tournamentYour best XIAll the scores and reports
INTERNET LINKOfficial Euro 2004 websiteOfficial England websiteThe BBC is not responsible for the content of external internet sites
ALSO IN THIS SECTIONGreece welcomes back squadZagorakis named top playerFigo weighing up optionsA fitting finale