The only hope Roy Hodgson's Three Lions side had of progressing to the last 16 was for the Azzurri to beat Los Ticos at the Arena Pernambuco on Friday, but Bryan Ruiz's header late in the first half proved decisive in the match and confirmed England's elimination.
It is the first time in 56 years England have fallen at the group stage, with that World Cup squad the only one younger than the current crop.
Costa Rica are through to the knockout round for the first time since Italia 90, even before they meet England in Belo Horizonte on Tuesday, while four-time winners Italy must now avoid defeat to Uruguay in Natal in order to progress with them.
Cesare Prandelli made three changes to his starting line-up after the 2-1 win over England on Saturday. Captain Gianluigi Buffon returned from injury to replace Salvatore Sirigu in goal, while Thiago Motta replaced Marco Verratti in midfield, and right-back Ignazio Abate was picked ahead of Gabriel Paletta. Costa Rica were unchanged following their 3-1 win over Uruguay.
Celso Borges headed over Buffon's crossbar from a corner as Costa Rica made the early running, while Thiago Motta shot wide before the half-hour mark at the other end.
Soon after, Mario Balotelli lifted a close-range chip over goalkeeper Keylor Navas after bringing down a glorious pass from Andrea Pirlo, but saw the ball bounce down off target.
Navas then had to save a fierce Balotelli volley, while Buffon had to be alert to push a Christian Bolanos shot round the post.
All the drama came just before the break as Joel Campbell was denied what looked a clear penalty when shoved to the ground in the box by Giorgio Chiellini. The Chilean referee Enrique Osses waved play on, however, and when Junior Diaz sent in an excellent cross from the left to the far post, Ruiz sent a firm header off the underside of the crossbar.
The ball bounced a foot over the line but goal-line technology ensured there was not another travesty of justice.
Prandelli threw on striker Antonio Cassano for Motta for the second half, and although Navas had to make a fingertip save to deny Matteo Darmian and beat away a Pirlo long-range free-kick, Costa Rica were relatively untroubled in the second half.
As time ticked on, Los Ticos still looked dangerous on the break and Buffon had to be quick out of his goal to clear the danger, with Campbell about to pounce.
Italy continued to hustle and bustle but their opponents kept the danger away from their goal, while at the other end Chiellini's block denied substitute Marcos Urena.
Randall Brenes was a yard away from scoring a sensational second in injury time but it mattered not - Costa Rica were through and England's fate was sealed.