The former Neighbours star took to the stage at the grand final of Eurovision Song Contest from Vienna, Austria on Sunday morning Australian time.
Goodrem had been considered one of Australia's best chances for the top prize since Dami Im finished second in 2016.
While voters loved her performance, she couldn't beat Bulgarian Dara, whose entry Bangaranga took out the 70th edition of the contest.
Israel came second, followed by Romania and then Australia.
Performing eighth out of 25 acts, the 41-year-old Australian stood at a sparkling, golden piano, playing and belting out the lyrics, "one touch, one kiss, all my life for a night life this".
As the song rose to a crescendo, Goodrem ascended to a platform that rose from her piano while sparklers and fog were unleashed behind her.
"Thank you so much," she said as she waved to the crowd and left the stage.
Australia had been second-favourite with bookmakers before votes were cast, behind Finland.
Eurovision tragics donning flags and fanciful golden costumes braved the early morning chill and gathered across Australia to watch Goodrem's rousing performance.
Millions of viewers around the world cast judgment on the performances by voting by phone or text message during and for a short time after the show, although they are not allowed to vote for their own country.
The act with the most points wins and the victorious country hosts the competition in the following year.
Australia has participated in Eurovision since 2015 and finished second the following year, when Dami Im's Sound of Silence finished runner-up to Ukraine's Jamala in Stockholm.
The often irreverent song competition has been marred by controversy as several countries boycotted it this year over Israel's participation.
The public broadcasters of five countries - Spain, the Netherlands, Ireland, Iceland and Slovenia - oppose Israel's involvement because of the country's treatment of Palestinians in the Gaza Strip.
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