Gareth’s Southgate’s squad had taken an early lead through Luke Shaw in an impressive first-half showing but were eventually pegged back by Leonardo Bonucci before the game went to extra time and was decided via a shootout.
Bukayo Saka’s saw his decisive spot-kick saved, leaving England supporters heartbroken.
In Trafalgar Square some fans began singing the national anthem, cheering the Three Lions’ accomplishments despite the defeat.
When penalties began, members of the crowd at Boxpark Croydon huddled together in a line, with their hands on each other’s shoulders.
Cheers soon became downturned faces as Italy were declared the winners.
Fans in Newcastle said they remained proud of the team after their penalty defeat.
At the PaddyPark fans zone, student Millie Carson, 18, said: “We have come so far, winning would have topped it all off.
“The team has brought the country together, everyone has been loving life in these hard times.”
Jake Shepherd, a 19-year-old project coordinator, said: “I’m gutted.
“But this sets us up for the World Cup – who says we cannot win it?”
Student Jack Brown, 18, said: “I’m sad we lost but they have done so well.
“I’m proud of this team.”
Many fans slumped to the floor while others lay on tables in despair at Birmingham’s Luna Springs big screen venue after England’s penalty shoot out loss.
As elation turned to deflation in little more than a minute, many supporters headed straight for the exit to head home.
Teenager Jack Smith said: “I feel sorry for the lads who had to take a penalty after coming on cold.
“I thought some of the bigger names would’ve stepped forward. It’s just a heartbreaking way to lose.”
In London, fans outside the Queens Head pub near Piccadilly Circus, screamed in disappointment when the final goal was scored.
The sound of glass shattering could be heard along with chants for the England team and the Three Lions song.
One man dejectedly removed England flags from his car before getting into it, while another was seen throwing traffic cones in the main road in frustration.
Stephanie Moothoosawmy, 24, from Essex, watched the game with friends in Oxford Circus on her phone.
She said: “It’s disappointing and I’m sure many people are really emotional. There was a lot riding on this match and England still played a great game.
“The important thing is that we don’t let this loss define us. I’m still really proud.”