The first half started at a superb pace, and the hosts took the lead on 19 minutes through a set-piece.
A Neymar corner from the left was met by Brazil captain Thiago Silva, who flicked it on to his centre-back partner David Luiz at the back post, who forced the ball into Claudio bravo’s goal to give the hosts a 1-0 lead.
Chile was pressing high, and they got a deserved equaliser after 32 minutes. Barcelona striker Alexis Sanchez finished well into the bottom corner after a poor pass from Hulk deep in his own half.
Brazil though they took the lead on 54 minutes through Hulk, but English referee Howard Webb ruled it out for a handball, to the annoyance of the Brazilian supporters in Belo Horizonte.
Neither team could score again in normal time, so the hosts were taken to extra-time by a resilient Chile team.
The first-half of extra time remained goalless, but Hulk was closest to scoring with a powerful shot with his right foot that was well saved by Bravo.
Chile thought they won it in the last minute of extra-time when Mauricio Pinilla, thumbed the bar with a strike.
Neither team could score though, and so the match ended 1-1 after the 120 minutes, and the first knockout match of the 2014 World Cup was to be decided by a penalty shoot-out.
With the score 2-2 after four penalties, Neymar scored his penalty meaning Gonzalo Jara had to score, only to hit the post and miss to send the Brazilian fans into ecstacy.