"It's a total bummer, that's all I have to say," said Solveig Gulbrandsen, who scored the goal that put Norway ahead initially. "You have to score in the good periods. We do not."
In a drab first half, Norway had the most chances, with Karen Bardsley superbly denying Isabell Helovsen early as England struggled in the Ottawa heat.
Norway broke the deadlock in the 54th minute with a fantastic header from Solveig Gulbrandsen -- at 34 years old, the most experienced member of the Norwegian team.
The header span into the corner, so close that it needed to be confirmed by goal line technology.
But just seven minutes later, English captain Steph Houghton equalised, before Lucy Bronze scored the winner 76 minutes into the game at Ottawa's Lansdowne Stadium.
England, who have never before won a knockout game at the World Cup, next plays Canada on Saturday in Vancouver.
The Norwegians, ranked 11th, finished second in Group B and held Germany, two-time champions, to a 1-1 draw last week.