The U.S. ran into red-hot goaltender and lost 5-2 to the Czech Republic on Friday, despite pelting Czech goalie Petr Mrazek with 54 shots.
The Americans (1-2) can finish no better than seventh and will play in the relegation round, which determines which country falls to the second-tier world championship.
Finland's 10-1 win over Denmark in a later Pool B game Friday officially sent the U.S. to the relegation round.
"We had high expectations coming into this tournament and obviously they're squashed after tonight's loss," head coach Dean Blais said.
The U.S. opened the tournament with an 11-4 thrashing of the Danes, but were then upset 4-1 by the dark-horse Finns.
Finland and the Czechs, both 2-1, each had six points on two victories and meet Saturday to determine second and third in Pool B.
Even if the U.S. wins Saturday night's Pool B finale against Canada (3-0), the Americans' couldn't gain a quarter-final berth because of losses to the Finns and the Czechs.
"Emotionally it's not going to be easy when you know that, no matter how you play, you're not going to get a chance to win a medal and that's why we're here," Blais said of the New Year's Eve game against Canada.
Blais coached the U.S. to the gold medal at the 2010 world junior hockey championship in Saskatoon, beating Canada in overtime to take the title.
This year's team had seven players returning from the squad that took bronze at the 2011 tournament in Buffalo, N.Y.
Captain Jason Zucker and goaltender Jack Campbell won medals both years as this was their third year on the team. The U.S. team boasted eight players chosen in the first round of the NHL draft.
While the U.S. outshot Finland 29-27 on Wednesday, they were often beaten to the puck by the fleet-footed Finns.
The Americans attacked hard Friday, but Mrazek, a Detroit Red Wings prospect who plays for the Ontario Hockey League's Ottawa 67's, stole the win for his team making save after save.
"Sometimes there's no justice the way the game is played," Blais lamented. "We had turnovers, but we had a lot of quality chances that we didn't have against Finland. So we thought we fixed what was broken. Obviously puck-luck wasn't on our side."
The score was tied 2-2 after two periods. The U.S. pressed hard in the third period, outshooting the Czechs 21-10.
"I thought we played outstanding," Zucker said. "Usually you get 54 shots in a game and you give yourself a damn good chance to win that game. Hats off to them. They played well and their goalie played great."
The U.S. had a chance to take a 3-2 lead on a penalty shot midway through the third period when Josh Archibald was tripped on a breakaway. Archibald tried a backhand deke on Mrazek, but lost control of the puck and bounced it off the side of the net.
Mrazek's play gave his teammates momentum. Czech forward Petr Holik scored the go-ahead goal with less than eight minutes to go. Thomas Filippi added an insurance marker at 17:19, followed by an empty-net goal by Holik just over a minute later.
"Everybody is heartbroken right now," said forward J.T. Miller. "I really don't know what to say, really. Just shocked right now. Leave it all out there for U.S.A. and it still isn't enough. Blows my mind."
Campbell stopped 25-of-29 shots in the game.
"He made the saves he needed to make and lot of times we can't win off two goals," said forward Emerson Etem, who plays for the Western Hockey League's Medicine Hat Tigers.
The Rexall Place crowd in Edmonton made the U.S. the tournament villain, booing them lustily every game and wildly cheering for any country playing them.
"I don't think the crowd has affected how we play," said centre Bill Arnold. "The only people who affect how we play is ourselves."