A Thomas Carol penalty after the siren has broken the hearts of the Australians and the Sydney faithful as France secured the 17-14 victory.
Theo Forner's second levelled the scores after the hosts took a 14-7 half-time lead following tries to Tim Clements and Josh Turner.
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The game looked to be heading to extra time after a French mistake, however, the Aussies were deemed to have not released the tackler, providing Carol with the chance to win the game for France.
"I was really proud of their effort and fight," coach John Manenti said.
"There were probably a couple times we carried into touch when we should've stayed in and ultimately in a game of nothing, a couple of things like that hurts you.
"I'm gutted for them because I know how much it meant to them to go well in this tournament.
"We've got to try and not let it deflate us too much because we need to come back tomorrow. We have a really hard game against Samoa so we need to dust ourselves off, play for a little pride because every point on this World Series is going to matter."
Slow starts remain the Achilles heel of the side as Forner raced away from James Turner for the opening try.
With Henry Hutchison on the sidelines likely for the foreseeable future, Tim Clements stepped up in his place, sprinting away to level the scores.
Josh Turner puts the hosts up 14-7 at the break, holding the defence just enough to slide over the line.
The French continued to apply pressure in the second half and found their answer via Forner's second, before sealing the game with a penalty goal.
It caps off a disappointing night for the hosts, eliminated in the quarter-finals in both competitions by their French counterparts.
Manenti's side play Samoa in the fifth-place semi-final (January 29, 2:06 pm), who sit just three points above them in the World Series.
"They're a pretty resilient group so they will bounce back well," Manenti believes.
"They're playing in front of their friends and family so I don't think it'll be too hard to bounce back.
"...Every point is gold and there's a few teams above us (such as USA and Argentina) that didn't make the final eight so now we have to scrap for every point to pull back on those guys."
France 17 (TRIES: Forner 2; CONS: Riva, Martin; PENS: Carol) def Australia 14 (TRIES: Clements, Josh Turner; CONS: Roache, Longbottom
