Derlis Gonzalez slotted two penalties, one in regular time and again in the shootout, to help Paraguay knock Brazil out of the 2015 Copa America.
Paraguay won 4-3 on penalties after a 1-1 draw that helped them seal a last-four match against Argentina, their second in the tournament having fought back from two goals down for a 2-2 draw in the teams' opening group match.
It was the second tournament in succession that Paraguay have beaten Brazil on penalties at the quarter-final stage after 2011 when they went on the reach the final.
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Robinho started and finished a fine move in the 15th minute to put Brazil ahead before Gonzalez equalised with 20 minutes to go when he converted a penalty after a hand ball by Thiago Silva.
Gonzalez then netted the decisive Paraguayan penalty with the fifth spot kick to take his side through.
We had chances to kill the game off. Paraguay, with all respect, aren't one of the best sides.
"Unfortunately, our game dropped in the second half," said Robinho.
"We had chances to kill the game off. Paraguay, with all respect, aren't one of the best sides. We didn't kill the game and unfortunately we lost a goal with a silly mistake and we lost."
Brazil had won 12 of their previous 13 matches since Dunga took charge after last year's World Cup.
They had more possession in the first half and weaved some good attacks but Paraguay were quick and dangerous on the break.
In the shootout, the writing was on the wall for Brazil from their second penalty which was put wide by Everton Ribeiro.
Another substitute, Douglas, missed their fourth to give Paraguay two penalties to settle the outcome.
Santa Cruz then skied his penalty, Philippe Coutinho gave Brazil hope by netting his but Gonzalez made no mistake.
Hosts Chile meet Peru in Monday's other semi-final.
Source: Al Jazeera and agencies