Croatia coach Zlatko Dalic made one change from the side which beat Russian Federation on Saturday with Marcelo Brozovic coming in for Andrej Kramaric.Croatia got off to the worst possible start when in just the 5th minute Kieran Trippier curled in a free kick to the top right corner from just outside the box to give England a 1-0 lead.
England were 22 minutes from the World Cup final, until their faltering game plan was finally punished by Perisic and Croatia, but they only have themselves to blame for being in the position to lose this game.
His own game ended in a similar fashion to England's tournament as he limped off injured in the closing period of extra-time while his team-mates tried - and ultimately failed - to get back into the game.
Croatia's victory will see them play France in the World Cup final at 11 a.m. ET on Sunday. And they were down against England in the semifinals and advanced.
"We are deservedly in the final", Croatia coach Zlatko Dalic said.
Fans at watch parties quickly dispersed after the game, however. "God willing, we will be world champions".
Kieran Trippier curled home a fifth minute free-kick that would have made his idol David Beckham proud.
England scored nine goals from set pieces at this tournament, the most by any team in a single World Cup tournament since 1966.
Croatia did their confidence little good in the 22nd minute when Danijel Subasic's poor kick went straight to Raheem Sterling, who found Harry Kane, but he ultimately shot wide after straying offside. Croatia had been desperately poor but started to get a foothold in the game as the match rolled past the hour mark and Luka Modric's influence grew.
But Ivan Perisic equalized in the 68th after getting his foot to ball before England defender Kyle Walker could head it away. Perisic was mightily unlucky not to add to his tally when his angled shot beat Pickford but cannoned off the post.
It was a different game from then on, with Croatia suddenly playing with accuracy and objective as England lost its shape and composure, though Kane missed a chance to win it in stoppage time when he headed wide from a free kick.
England almost scored again in extra time on a set piece when Stones' header was cleared off the line by Sime Vrsaljko.
"This is a miracle. I think people turn on the national team far too easily, they need to take a lead from the real fans - back the boys whatever, and drop the negativity".
"We had hoped (for this) and we believed in our team, but the feeling when we finally entered the finals can not be compared to anything", said Ivan Kecerin, 41.
On the eve of the game, England manager Southgate said he hoped the team's successful run at the tournament would help unify the country after "some hard moments" in recent years - an apparent reference to Brexit. "There's a lot we could have done better". We were a goal down in three games in a row.
"We've come an incredible long way in a short space of time".