Sweden stunned the United States 5-4 in a sudden-death penalty shootout Sunday to surge into a Womens World Cup quarter-final against Japan and consign the defending champions to their earliest-ever exit.

The title-holders dominated the opening 90 minutes but a breakthrough proved elusive with Swedish goalkeeper Zecira Musovic making some startling saves to keep her side alive.

With the deadlock remaining after extra-time it went to penalties in Melbourne - and the tension went up another notch.

Swedens Nathalie Bjorn was the first to miss, skying high, only for Megan Rapinoe to do the same.

Rebecka Blomqvists effort was saved, again putting the USA in the driving seat, only for Sophia Smith to blast wide.

When Kelley OHara hit the post, it was all down to Swedens Lina Hurtig, who made sure - but only after VAR ruled her kick had crossed the line.

The dramatic conclusion leaves the tournament without the two top-ranked sides after Germanys group-stage departure, with the Swedes now considered among the chief frontrunners as the world number three.

Peter Gerhardssons side, who are striving to better their third-place finish in 2019, next face the 2011 champions Japan.

But it was a bitter blow for the USA and an inglorious end for Rapinoe, the Golden Boot winner at the 2019 tournament. She will retire at the end of the season.

Expectations were high coming into the tournament for the four-time champions, who had made at least the semi-finals at every World Cup.

But they never looked up to the task in the group stage, with just one win, against Vietnam.

This devastating early exit will be seen as a major underachievement. (AFP: Text, Excluding Headline)

Swedens forward #08 Lina Hurtig (C) and teammates celebrate their win during the Australia and New Zealand 2023 Womens World Cup round of 16 football match between Sweden and USA at Melbourne Rectangular Stadium in Melbourne on August 6, 2023.