Kim Smith of Mission, B.C., led Canada with 17 points, shooting 5-of-7 from the field. Teresa Gabriele, also from Mission, and Hamilton's Shona Thorburn chipped in with nine points each.
The second-ranked Australians were led by their tall front court of Liz Cambage, who scored 19 points, and Lauren Jackson, who finished with 18 points and nine rebounds.
"Six-foot-eight is tough to guard and so is six-foot-five," Smith said. "We battled hard. We gave it everything we could, but in the end we couldn't overcome their size."
Canada (2-3) finished fourth in its group and will face the top-ranked Americans in the quarter-finals on Tuesday. The U.S. won its group after posting a 114-66 rout of China.
"I'm a little disappointed to be honest, we wanted to get a better match up in the quarter-finals," Smith said. "It's going to be a tough game, they have the best 12 players in the world. We are going to have to play team defence."
The Americans don't expect Canada to back down from the daunting challenge.
"They are a tough, scrappy team, they never quit," said American forward Maya Moore. "Every team that they play they make them earn it. That's exactly the kind of game we want."
Added American star Diana Taurasi: "Canada are a tough team. They beat you up."
Australia (4-1) dominated play early, taking a 12-0 lead and cruising to a 24-10 advantage after the first quarter. Canada didn't get its first points until four minutes into the game.
Canada found a way to crack the Australian defence in the second quarter, going on a 6-0 run to cut Australia's lead to 11 points. The Aussies led 35-22 at the half.
Canada went on a 16-6 run to finish the third quarter, reducing Australia's lead to five points.
Behind Smith's shooting Canada pulled to within two points in the fourth quarter, but Jackson hit key free-throws down the stretch to seal the victory for Australia.
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