Hyon-Hi Yun scored in the 78th minute to give North Korea a 2-1 victory over Canada on Monday in the final round-robin game.
Christine Exeter of Pickering, Ont., had staked Canada to an early lead in the 12th minute but Un Hwa Kim tied the game before half time.
"We had no intentions of sitting back, but it was (North Korea) that forced us back from the midway point of the first half," said Canadian coach Andrew Olivieri.
Canada finished the tournament with a 1-2 record, good for third in Group C. It opened with a 6-0 over Argentina before losing 2-1 to Norway.
The North Koreans finished on top of the group with a 3-0 record and will face the United States in the quarter-finals.
On Monday, the U.S. was defeated 3-0 by defending champion Germany. After taking a 1-0 lead on a goal by Lena Lotzen in the first half, the Germans doubled the advantage in the 54th minute when Lotzen scored again, pouncing on a rebound off a shot by Silvana Chojnowski.
Melanie Leupolz scored from close range just two minutes later to give Germany a commanding 3-0 lead.
"We just made a couple of mistakes and they punished us for that and that's what good teams do," U.S. coach Steve Swanson said. "One of our goals was to advance, we've done that, and we're focused on the next game."
China beat Ghana 1-0 in Group D's other game. China and the U.S. both finished the group stage with four points but the Americans advanced thanks to superior goal difference.
Zhao Xindi scored the only goal in the 35th minute for China, which went into its final group game with an eight-goal deficit to the U.S.
Norway also advanced out of Group C with a 4-1 win over Argentina and will face Germany in the quarter-finals.
Japan versus South Korea and Mexico against Nigeria are the other quarter-final matchups.
With files from The Associated Press