Dreadful defending allowed the Dutch to seal a 3-1 extra-time victory and progress to the inaugural Nations League final.
Disrupted preparation was followed by embarrassing fan disorder before Thursday's semi-final in Guimaraes, where the Three Lions had looked set to seal their place in Sunday's finale against Portugal and a shot at their first piece of major silverware since the 1966 World Cup.
Marcus Rashford's first-half penalty was cancelled out by Matthijs De Ligt, but substitute Jesse Lingard sent England fans wild by coolly slotting home in the 83rd minute - a goal that only fleetingly had the country in dreamland.
Video assistant referee Francois Letexier ruled the goal out for the narrowest of offsides and Holland punished Gareth Southgate's men as they suffered an extra-time semi-final loss for the second successive summer.
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Croatia brought their World Cup journey to a crashing end last year and this time dawdling by John Stones put Holland on course for victory.
The defender lost De Ligt for Holland's leveller and then watched as Kyle Walker turned into his own net under pressure from Quincy Promes having inexplicably given away the ball.
The heartbreak did not stop there as Ross Barkley became the latest to overplay at the back, with his poor touch lapped up by Memphis Depay who squared for Promes to score.
"Towards the end of the second half I thought we were the better team but we let in a goal and made some silly mistakes, at this level you get punished for them," he said.
"They got their pressing right on the night and we made a few mistakes. We tried at times but it didn't work.
"We have to keep trying, we can't just stop here. The team was slightly altered today, with a few players missing who normally play. Players came in and did a job, it was only Dec's (Rice) second game, we have a few new players and everyone tried their best but it wasn't to be.
"We have still made progress to get to this stage, it's about kicking on and trying achieve the last bit."
Regarding Lingard's disallowed goal, which would have put England 2-1 up, Sterling added: "It's one of those things, one day it might help us but today it didn't.
"It went on the screen and it said they were checking for offside, so from that moment I realised there might be something there."