Kieran Trippier opened the scoring with a brilliant free-kick into the top-corner inside five minutes - and then England dominated in the first half, with Harry Kane having the pick of the chances: one on one with Danijel Subašić, the Spurs striker aimed his initial shot at the keeper and then hit the post with the follow-up.
Croatia's Ivan Perisic scores to make it 1-1.
Gareth Southgate consistently downplayed the euphoria in his team in the build-up, and for a while England gave every indication they were going to take charge of their own destiny, as Trippier found the net with a delightful free-kick in the fifth minute.
Defender Vrsaljko was also instrumental, clearing a shot off the line in the first half of extra time as well as setting up Perisic's equaliser.
Mandzukic's movement was also a constant challenge for England's back three and John Stones, in particular, did not look as composed as he has done in previous games.
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Mario Mandzukic got the victor in injury time to put Croatia, with previously a tournament-best semifinal in 1998 to its name, one game away from winning it all.
The best chance for a second goal, however, was wasted by an unmarked Jesse Lingard when he curled wide when a goal looked certain.
England paid the price for those early misses when Perisic showed great determination to get in front of Kyle Walker to meet a curling Sime Vrsaljko cross and though his boot was arguably high, Walker was stooping and there were few complaints.
Josip Pivaric of Croatia celebrates his Fifa World Cup semifinal win over England.
The crowd fell a little flat as the game went into extra time, with many perhaps fearing the prospect of penalties and the memory of the last time England made it so far at Italia 90 - a 4-3 penalty shootout loss to West Germany.
As well as scoring, Perisic also hit the post for the second straight game and set up Mandzukic's victor, heading a poor clearance toward the Juventus striker to score.
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It's the third consecutive game the Croatians have taken a game to extra time.
The captain was the man of the match again in the penalty shootout win over Russian Federation in Sochi at the weekend.
5' GOAL! Croatia 0-1 England: A dream start for England!
Prime Minister Benjamin Netanyahu with Russian Prime Minister Dmitry Medvedev and Croatian Prime Minister Andrej Plenković at the World Cup semifinal match in Moscow on 11 July, 2018.
England went ahead with its ninth set-piece goal of the tournament, after Luca Modric tripped Dele Alli, giving England a free kick about 25 yards out in the centre of the field. They gifted England a huge amount of space in midfield and allowed wing-backs Ashley Young and Trippier to push forward and provide options. This time, the Croatians have only recorded a few shots at Jordan Pickford's goal from outside the penalty area, a lot of them off target.
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