The thrilling quarter-final game at Montreal's Olympic Stadium went to a nail-biting penalty shoot-out after the two teams were locked 1-1 after 30 minutes of extra time.
Louisa Necib, dubbed the "Female Zidane" of the French women's game, could only rue a missed chance to score after just 49 seconds, before she finally nailed the opener on 64 minutes.
Celia Sasic levelled for Germany with a penalty six minutes from time, and in a tense half hour of extra-time substitute Gaetane Thiney wasted a late chance to put France into the last four for the second straight time.
Germany captain Nadine Angerer was the heroine of the night as the goalkeeper saved 20-year-old substitute Claire Lavogez's final penalty in the shoot-out.
"We're extremely elated, full of adrenaline right now," said the 36-year-old former world player of the year, who has won titles with Germany in 2003 and 2007.
"It was hard work. We had to fight really hard and we were rewarded."
France coach Philippe Bergeroo said: "Everyone keeps telling me how well we played, but we lost. It's a great, great disappointment. We can only blame ourselves, we couldn't take the chances we had."
Les Bleues will now have to wait until the 2016 Rio Olympics for another shot at a first title.