David Luiz opened the scoring for Brazil in the 18th minute, after a corner from Neymar that was flicked on by Thiago Silva. Luiz was at the back post to scramble the ball in.
Chile, who were outstanding throughout, equalised after 32 minutes when Alexis Sanchez punished poor Brazil defending with a cool finish past Julio Cesar.
Both teams pushed for a winner, but neither team could find one as the result was forced to penalties where hosts Brazil come out on top 3-2.
Here are the player ratings for Chile:
Claudio Bravo - 8
The new Barcelona signing made a good save from a Dani Alves shot in the first half, and didn't make a mistake from long-range shots later on. Saved a Hulk penalty in the shoot out.
Gary Medel - 8
Medel was superb. The defender did everything asked of him by the Brazilian defence; blocks, tackles and clearances. Was in tears when they were knocked out. Shame as he did everything for his country.
Francisco Silva - 7
Brilliant piece of defending in the first half to block a goal-bound Neymar header wide of the post. Was outpaced at times though by the Brazilian striker.
Gonzalo Jara - 7
Former West Brom player hit the post with the penalty that meant Chile were knocked out of the World Cup, played with real energy throughout the 120 minutes though.
Mauricio Isla - 8
Made a great tackle in the first half when it looked like Fred was bound to score, linked up well when going forward, created a good chance for Aranguiz to score with a wonderful pass.
Charles Aranguiz - 8
Nearly scored in the second-half but for a save from Julio Cesar. Was often the catalyst for Chile's pressing game that worked so well for them, a lot of energy in his performance.
Marcelo Diaz - 8
Was dictating the possession football for Chile in the midfield of the park, was very reminiscent of a Pirlo performance. Found so much space in doing so, good performance.
Eugenio Mena - 7
Made an outstanding clearance to prevent a certain goal for Jo in the second half, other than that made little impact on the match.
Arturo Vidal - 7
Linked up well going forward with Aranguiz and Diaz, didn't have as much of the ball in dangerous areas as he would have liked. Pressed the ball well though when defending.
Alexis Sanchez - 8
Looked dangerous every time he was given space, and even when he was closed down he maintained possession on a number of occasions. Barcelona will be silly to let him leave.
Eduardo Vargas - 7
Held the ball up well for his side, pressed well. However he feel he could have done better on certain counter-attacks for Chile when well placed.
Felipe Gutierrez - 7
Come on for Eduardo Vargas after 57 minutes, provided much needed energy in the Chile midfield and kep possession well for his country.
Mauricio Pinilla - 7
Come on for Arturo Vidal after 87 minutes, hit the cross bar in the last minute of extra time with a thunderous effort from the edge of the area. Missed his penalty in the shoot-out though.
Jose Manuel Rojas - 7
Come on for Gary Medel after 108 minutes to ensure Chile held out the remaining twelve minutes and get to penalties. Helped achieve that with his fresh legs.