Despite their 16 shots on goal during regulation time, the Americans failed to win their fourth consecutive title after an intense shootout with the World Cup champion.

"It was a good game by both teams," said U.S. head coach Greg Ryan.

"I think we played much better this year. Last year, I thought Germany dominated the game and we were fortunate to score the goal and defend well. Tonight, I think we were the more aggressive team, (constantly) attacking throughout the game."

The U.S. had the first scoring opportunity in the 15th minute when striker Heather O'Reilly sent a perfect cross to teammate Aly Wagner who slid past the German defense and shot just wide from 14 yards out.

Wagner tried to score again in the 30th minute when she received a square ball from captain Kristine Lilly, but missed the target, firing at the upper left corner of the cross bar.

Four minutes later, Carli Lloyd shared Wagner's bad luck and hit the bar from 30-yards out.

Striker Abby Wambach came close to scoring late in the second half when she hammered a shot from 12 yards out that hit Germany goalkeeper Silke Rottenberg's shoulder and eventually was cleared by the German defense.

Germany had the best opportunity to score in overtime when Wimbersky nailed a cross from the right side that goalkeeper Hope Solo had to punch away. Celia Okoyino da Mbabi found the ball at the top of the penalty and fired at the left corner forcing Solo to knock it out of bounds.

With the game still scoreless after 120 minutes, the two teams were forced to enter a penalty shootout, in which Germany prevailed.

Wagner scored on the U.S.'s first kick followed by Germany's Melanie Behringer who also grabbed a goal. Boxx then shot to the right corner giving Rottenberg a save. Conny Pohlers then put Germany in the lead when she fired past Solo. Whitehill retaliated and struck the upper right corner, while Prinz shot over the goal to tie the shootout 2-2. Wambach then hit the bottom of the crossbar to give Germany the advantage as Okoyino da Mbabi fired into the right corner. Lilly shot last for the U.S. and scored, but Wimbersky tricked Solo to hand Germany the win.

The match marked the U.S.'s first loss since November 6, 2004, when they were defeated by Denmark, 3-1.

Also in Algarve Cup action: Sweden's Lotta Schelin scored the lone goal to defeat France and take third place; Norway gained fifth place after shutting out China 1-0; Finland received seventh after squeaking by Mexico 4-3; Denmark took ninth place after crushing Ireland 4-0.