Neymar seemed to put the South American team on course for victory with a stunning 106th-minute strike after a mazy run at Education City stadium. But Croatia substitute Bruno Petkovic equalized with a long-range effort that deflected in off Marquinhos with four minutes of extra time remaining.
Mislav Orsic, Luka Modric, Lovro Majer and Nikola Vlasic converted each of Croatia's spot kicks in the shootout. Rodrygo's feeble first attempt was saved by Dominik Livakovic before Pedro and Casemiro held their nerve only for Marquinhos to send his team's fourth penalty crashing against the left post.
Neymar, who made his international debut in 2010, added: "I want to take this time to think about it, think about what I want for myself. I will not close the door to playing with Brazil, nor do I say 100% that I'll come back."
Neymar's strike saw him equal Pele as Brazil's all-time leading scorer with 77 goals from 124 matches.