(CNN) -- A rampant Germany thrashed arch rivals England 4-1 in Bloemfontein to reach the quarterfinals of the 2010 World Cup.
Miroslav Klose and Lukas Podolski took advantage of sloppy defending to give Germany a 2-0 lead before Matthew Upson headed in for England.
Frank Lampard was denied an equalizing goal for England when the officials failed to spot that the ball had clearly crossed the line.
But despite England coach Fabio Capello's claim that the controversy was the turning point, a far superior Germany ran away with the match in the second half, with Thomas Muller scoring twice on the break to inflict England's biggest ever World Cup defeat.
"I think we played well but then I was disappointed by the mistakes and they counter-attacked well," Capello told BBC Sport.
"Germany is a big team and they played well -- we made mistakes, but the referee made a bigger one. This is football."
It was the first World Cup meeting between two of football's oldest foes since 1990, when West Germany beat England on penalties after a 1-1 draw. England's only previous victory had come in the 1966 final -- a 4-2 triumph at London's Wembley.
Germany carved the game's first opening inside five minutes when a pass over England's defense found Mesut Ozil, whose shot was saved by the legs of David James.
The same direct approach brought the opening goal after 20 minutes when a long punt downfield from Manuel Neuer sent Klose racing clear.
The striker showed strength to hold off Upson and flick the ball past James with an outstretched right foot to post his 50th international goal and his 12th at World Cup finals.
England's defenders were caught out of position again for Germany's second goal as Muller shifted the ball to Podolski, who slashed a left-footed shot into the far corner.
Five minutes later, England got back in the game when Gerrard's cross was headed home by Upson.
Then came the controversial moment when Lampard's strike from the edge of the penalty area struck the underside of the bar and bounced down about two feet over the goal-line, only for Uruguayan referee Jorge Larrionda and his assistants to fail to award a goal.
Germany may feel the decision atones for 1966, when England were famously awarded a third goal even though Geoff Hurst's shot appeared to bounce down on the line.
England looked the stronger side in early stages of the second half and Lampard rattled the bar with a free-kick.
But then the German onslaught began as England's hopes were buried by two fine counter-attacking goals in three minutes.
First Bastian Schweinsteiger teed up Muller to smash the third past James at his near post, and then Mesut Ozil crossed for the Bayern Munich winger to compound England's misery.
Germany, who have now reached at least the quarterfinals at every World Cup since 1954, will face Argentina in the last eight on Saturday.