Thomas Tuchel's team conceded twice late on - via Enzo Fernandez and Lautaro Martinez - as their hopes of reaching a first world final since 1966 evaporated in Atlanta.
Anthony Gordon's second-half goal edged England in front in a tight battle, but Tuchel's move into defensive mode hampered the team, and the Argentina revival tipped the balance.
Tuchel's tactical calls, alongside the struggles of his players to rise to the challenge late on, will be assessed in the weeks and months to come and defender Marc Guehi was clear over how England lost out.
"We should have carried on pushing. It kind of felt like we scored and then the mentality was to go back and defend," he told BBC Sport.
"It's hard to think about the future right now, and whether we can win trophies, we're just disappointed."
England have one final assignment before leaving the USA, as they take on France in the controversial third place playoff on Saturday July 18 in Miami, with Spain facing Argentina in the final the following day in New Jersey.
Tuchel is expected to make several changes to face off with Les Bleus with the potential of a final World Cup appearance for some of his veteran stars.