NOTE:: On The World Game tonight at 9.30pm on SBS TWO, highlights of the Women's World Cup final and semi-finals.
The United States led through Alex Morgan in normal time and Abby Wambach in extra-time, but Aya Miyama and Homare Sawa equalised - the latter taking the tournament golden boot from midfield.
A low-quality shoot-out saw Shannon Boxx, Tobin Heath and Carli Lloyd miss for the favourite before defender Saki Kumagai settled it 3-1 in Japan's favour.
The USA had all the early pressure, Lloyd with the best effort as her drive from just inside the penalty area flashed narrowly over.
Leading striker Wambach then went closest to breaking the deadlock with a fierce right-footed drive which beat goalkeeper Ayumi Kaihori's dive but thundered off the crossbar to safety.
Japan finally began to establish itself in the game but, after a training-ground corner to the edge of the box, Nahomi Kawasumi's wild finish over the bar summed up its lack of penetration.
Youngster Morgan, a half-time substitute for the injured Lauren Cheney, almost made an immediate impact when she poked Heather O'Reilly's cross against the post. The rebound struck Kaihori and bounced across goal, but captain Sawa cleared.
The breakthrough came in the 69th minute from Morgan, who ran on to Megan Rapinoe's long pass, held off Kumagai, took a touch and finished powerfully across Kaihori with her left foot.
But Japan equalised with 10 minutes remaining when Rachael Buehler and Alex Krieger got in a mess defending substitute Yuki Nagasato's cross and Miyama took full advantage to take the game into extra-time.
Morgan shot well wide after again beating Kumagai, who twice stood firm to prevent the powerful Wambach reaching dangerous crosses.
But Wambach was not to be denied and netted her fourth headed goal of the tournament, stooping to power home the impressive Morgan's cross.
Sawa and Nagasato were unable to profit after the American defence did its best to contrive another Japanese equaliser and United States captain Christie Rampone cleared as fullback Yukari Kinga's effort bobbled goalwards - but again Japan had something up its sleeve.
Miyama's corner to the near post was met by a leaping backheel from Sawa, which took a slight touch off Wambach and nestled in the net.
Wambach skied a glorious chance for a winner, again under pressure from Kumagai, before Japan's Azusa Iwashimizu was shown the first ever red card in a women's World Cup final for a foul on Morgan which denied a goalscoring chance and ensured penalties.
Boxx's poor spot-kick was saved by the trailing leg of Kaihori and, after Miyama put Japan ahead, Lloyd blazed over.
Hope Solo denied Nagasato but Kaihori saved well from substitute Heath and Mizuho Sakaguchi's effort squeezed under Solo's dive.
Wambach converted confidently but Kumagai hammered a superb last penalty into the top corner to secure the trophy for the underdog.