Mario Mandzukic scores the extra-time victor in the 109th minute to break English hearts.
This being said, the second-half proved to be a different affair and the Croats got their just reward when Ivan Perisic expertly guided home a superb cross to level the match.
"They underestimated Croatia tonight and that was a huge mistake".
France, who boast a powerful mix of youth and experience, will start favourites when they play the third World Cup final in their history after they beat Belgium 1-0 in Saint Petersburg on Tuesday, sparking jubilant scenes in Paris.
The Three Lions were kicked out of the tournament last night after a heart-breaking defeat during extra time against Croatia.
However, with Federation Internationale de Football Association not even choosing to dish out a fine, this is hardly going to see Croatia expelled from the tournament.
Croatia, in their first semi since 1998, levelled through Ivan Perisic after 68 minutes and then looked the more unsafe side.
Defender Sime Vrsaljko kept the score even by heading a shot off the goal line about 10 minutes before Mandzukic scored. In the 109th minute, Perisic struck again.
Paul Pogba: France must make amends for Euro 2016 final defeat
Despite his inability to find the back of the net, one more win is all that counts for Giroud. He was more creative in terms of recovery of the ball, one-on-ones, he performed very well.
It's the first time that Croatia - a nation of just 4 million people - have reached the final of the World Cup, and to say their players were elated was like saying Gareth Southgate kind of likes waistcoats. "We probably needed that second goal [in the first half]".
Croatia continued to probe and following a lack of concentration in defence, Mario Mandzukic pounced on a lose ball and hit a left-footed strike beyond Jordan Pickford's reach.
Mandzukic was mobbed by teammates, who jumped on him in the corner and trapped photographers under them in the crush.
England striker Kane, who is the World Cup's top scorer with six goals so far, told ITV after the loss that the team was "gutted" as they "worked so hard".
One defeat against a second-rate Belgium XI has tarnished an otherwise flawless record for Southgate's side, while England have avoided perennial powerhouses Spain, Germany and Brazil.
Croatia is the first team to win three straight extra-time matches in the World Cup.
England grew ragged and started to look emotionally drained at the end of such a long campaign.
The Daily Mail posted an image of Southgate and Harry Kane with the caption: "Yes, it all ended in tears".
England had its moments to come back but could not finish its chances.