In a pulsating encounter, the Matildas were defeated 4-2 by Sweden at Saitama Stadium in the Group G match between the two opening round winners.
Australia named a lineup that featured ten players from the starting XI against New Zealand, with one big change. Lydia Williams replaced at goalkeeper with Tony Gustavsson giving the gifted 23-year-old Teagan Micah the job of protecting the Australian goal – and an Olympic Games debut.
The last time the two teams met it was a nil all draw in the friendly a month ago.
However, the European football giant were coming off red-hot form after defeating the mighty United States in their first Olympic outing on Wednesday night.
A win for either team would mean a virtual gold pass into the knockout stage, and it was a close chess-like game early.
Despite Australia opening the match the better, through some high-tempo attacking football, the Matildas' assignment became a lot harder against the run of play Sofia Jakobbson who delivered a beauty for Fridolina Rolfö to find the back of the net.
Down 1-0, the Matildas bounced back quickly and not long after were level.
The equalizer coming through a superb header from Sam after a beautiful floated delivery from Kyah Simon.
Australia looked to take control of the match and just before the break Kerr was very unlucky not to get a penalty and head to the spot for the lead into the break.
The Matildas didn't need to wait long after the break and no luck needed just pure class, pure skill, pure Kerr.
Fellow strike partner Caitlin Foord put in the perfect cross for Kerr to head it home and put the Australians up 2 - 1.
The Matildas barely had time to celebrate, before the Swedes were level with Hurtig smashing in the equalizer to make it 2-2.
In a see-sawing match, it was Sweden's turn to take control and on the back foot the Matildas were soon down 3-2 when Rolfö rifled a strike from long range past Micah for her second.
A pulsating game of football.
High drama when Caitlin Foord was fouled, Sam Kerr went to the spot but the striker was denied a hattrick by a superb kick save from the Swedish guardian Hedvig Lindahl.
From potentially all locked up at 3 - 3, it was Sweden who went ahead again when super sub Stina Blackstenius headed home to two point buffer.
The Matildas continued to rally and kept the pressure up on Sweden with a few chances late, but Sweden kept out the Aussie attack.
With three points Australia still has a strong chance to progress to the knockout phase and will take on the United States in their final Group G match.