Fabio Grosso scored a goal in the last minute of extra time to put Italy 1-0 ahead after it had looked like Germany were setting the game up to go to penalties.
Unbelieveably it was Italy that scored next as Alessandro Del Piero scored another goal in the last seconds.
Italy are going to Berlin and Germany are going to Stuttgart for the 3rd & 4th play off.
German dreams of reaching the FIFA World Cup™ Final on home soil died in Dortmund where they have never lost before.
A penalty shoot-out was looming when the deadlock was broken in the 119th minute as Fabio Grosso curled a left-footed shot past the despairing dive of Jens Lehmann from the right side of the penalty box.
Substitute Alessandro Del Piero made sure of Italy's place in the Final when he beat Lehmann from close range in added time at the end of the extra period. Prior to these two goals Lehmann had enjoyed an impeccable evening.
Italy now advance to their first FIFA World Cup Final since 1994 and their sixth overall. Italy will face the winners of Wednesday's Portugal-France semi-final in Berlin's Olympiastadion on Sunday.
Germany: Lehmann, Friedrich, Metzelder, Mertesacker, Lahm, Borowski (Schweinsteiger 72), Ballack, Kehl, Schneider (Odonkor 83), Klose (Neuville 111), Podolski.
Subs Not Used: Jansen, Huth, Nowotny, Hanke, Kahn, Asamoah, Hitzlsperger, Hildebrand.
Booked: Borowski, Metzelder.
Italy: Buffon, Zambrotta, Cannavaro, Materazzi, Grosso, Camoranesi (Iaquinta 90), Perrotta (Del Piero 104), Gattuso, Pirlo, Totti, Toni (Gilardino 74).
Subs Not Used: Zaccardo, Barzagli, Peruzzi, Nesta, Amelia, Barone, Inzaghi, Oddo.
Booked: Camoranesi.
Goals: Grosso 119, Del Piero 120.
Att: 65,000
Ref: Benito Archundia Tellez (Mexico).
Fifa man of the match: Andrea Pirlo