Brazil, favourites along with Germany to win the gold medal, thrashed Sweden 5-1 in the group stage 10 days ago, but when they displayed their full array of tight control and dribbling skills at the Maracana stadium on Tuesday, Sweden resisted with a strong defence.
Goalkeeper Hedvig Lindahl made the difference for Sweden as she saved penalty kicks from Cristiane and Andressa to secure the victory. Brazil keeper Barbara could save only one kick, from Kosovare Asllani, meaning Lisa Dahlkvist slotted home the winnning penalty kick.
"Playing at this wonderful stadium. I can only say frustration, no other way. I will not apologise as we dominated the match and tried to find the best way to score. Through the whole 120 minutes we did try our best, we tried everything, that's why it is so frustrating," Brazil's head coach Vadao said.
"There were few chances and though we had control of the game we had few opportunities and we know what happened in the penalties," he added.
Germany, who won three consecutive Olympic bronzes between 2000 and 2008, defeated Canada 2-0 in the second semi-final.
Melanie Behringer's 20th minute penalty and Sara Daebritz's goal on the hour mark ensured a comfortable victory for the German women.
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