Australia's hunt for a maiden knockout win goes on after the Socceroos lost their first shootout at the World Cup finals 4-2, with the score locked at 1-1 at full-time, then extra-time.
Harry Souttar blasted the opening penalty into the stands, while Lucas Herrington hit the bar with the fourth.
Captain Maty Ryan, surprisingly substituted in for Patrick Beach by coach Tony Popovic for penalties after not playing all tournament, didn't get near Egypt's spot-kicks.
Egypt Mahmoud Saber buried Egypt's first penalty, while Rami Rabia added a second and superstar captain Mohamed Salah a third.
Jackson Irvine and Awer Mabil both buried their spot kicks, but the writing was on the wall once 18-year-old Herrington - a surprise taker - missed.
Then Hossam Abdelmaguid sent Egypt into ecstasy and Australia into despair.
Earlier Egypt's Emam Ashour opened the scoring in the 13th minute in front of 70,244 fans at Dallas Stadium, before Aiden O'Neill's wicked free kick forced Mohamed Hany to head the ball into his own net in the 55th minute.
Socceroos wing-back Jordan Bos was clattered by Rami Rabia late in the first half and was forced out of the game with an apparent left knee injury.
Egypt captain and former Liverpool star Salah started at Dallas Stadium on Friday (4am AEST Saturday), having been under a cloud with a hamstring strain.
For the first time in his tenure, coach Tony Popovic didn't make any changes to his starting line-up that drew 0-0 with Paraguay, including keeping the faith with an attack spearheaded by Nestory Irankunda.
But Irankunda cut a frustrated figure for much of the game as he had a difficult day at the point of the attack and was substituted for Mohamed Toure in the 74th minute.
O'Neill was once again fantastic in midfield, working hard both defensively and attempting to create, while Harry Souttar and Herrington were colossal at the back.
Australia started brightly, with Cristian Volpato brilliantly turning Egypt's defence before finding the crossbar in the fifth minute.
Egypt took the lead from a recycled free kick, where Karim Hafez whipped a terrific ball into the back post and Ashour, who had gotten away from Irankunda, fired a bullet header past Beach.
Nine seconds into the second half, Australia received a massive let-off when Omar Marmoush broke free but fired wide.
Then the Socceroos hit back via the own goal.
Beach pulled off an extraordinary diving save, backpedalling then pawing the ball over the bar to deny Rabia at the death and send the game to extra time.
But it was in vain and Egypt will now progress to take on either Argentina or Cape Verde in the round of 16.
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