Aiming to better the colour of their medal won in Tokyo three years back, India created more opportunities but the Germans took their limited chances and exacted revenge for their Tokyo Games bronze play-off defeat.
India got 11 penalty corners but converted only two while Germany converted one out of the four, apart from capitalising on a penalty stroke and a field goal.
India still have a chance to win their second consecutive Olympic medal when they play for bronze against Spain on Thursday, while Germany and Netherlands will face-off in the gold medal contest.
The last time India won back-to-back Olympic medals was in 1968 and 1972.
India enjoyed better possession in the first quarter, earning as many as seven penalty corners but could convert only one. Gradually the Germans seized the momentum.
India had beaten Germany at the Tokyo Games bronze play-off to end a 41-year wait for an Olympic medal.
The last time time Indian hockey team reached the final of the Olympic Games was in 1980 Moscow Games.
Despite not having key defender Amit Rohidas in the line-up, the Indian team fought hard and never looked like fizzling or succumbing to pressure.
Harmanpreet (7th) and Sukhjeet (36th) scored for India while
Gonzalo Peillat (18th) Christopher Ruehr (27th) and Marco Mitcau (54th) found the net for the winners.
Hardik entered the circle from the left and in no time created a penalty corner by landing a ball on the foot of a German defender but Jean-Paul Dannesburg blocked Harmanpreet’s attempt.
However, Hardik collected the rebound ball to earn one more chance but German custodian Jean-Paul Dennerberg again made a save.
A Harmanpreet long hit touched the foot of a German defender, resulting in another penalty corner for India but it also went in vain.
India continued to attack, getting three more chances and finally got on board on the sixth.
Harmanpreet fired his shot that deflected off Martin Zwicker and ballooned into the goal post.
Jarmanpreet Singh then raised his stick in the air to stop a scoop from a German player, which was resulted in a penalty corner for dangerous play in the second quarter.
And Germany were quick to neutralise the lead through Peillat’s precision strike from a penalty corner.
Soon after receiving a pass, Sumit made a terrific run from the left but was blocked by two German defenders.
Lalit Upadhyay also had a chance to double India’s lead after receiving a ball from Abhishek, but he hit over the bar.
India continued to attack as Mandeep Singh flew with the ball from the centre of the pitch, and passed it to Gurjant Singh inside the striking circle but he lost possession of the ball.
The Germans did not miss their chances when they got a penalty corner, which was converted into a penalty stroke as the goal-bound ball touched Jarmanpreet’s foot.
And Ruehr made no mistake in getting past Sreejesh’s defence, firing one on his right side.
India got a chance to level the score but fluffed two more penalty corners.
Harmanpreet’s shot was blocked by Dannerberg with his left hand and Hardik hit the rebound wide.
A 10th penalty corner came India’s way but it went abegging.
The score-levelling goal finally came from the stick of Sukhjeet, who deflected the dragflick of Harmanpreet from the team’s 11th penalty corner.
Germany got their chance to move ahead with their third penalty corner early into the fourth quarter when Harmanpreet obstructed a rival player.
But Sreejesh saved the chance, the rebound ball was again fired towards the Indian post but Ruehr’s shot from the left was saved by Sanjay.
The Germans did not have to wait for their next chance but India’s stout defence averted the danger.
Sreejesh’s defence was, though, breached when Miltkau deflected a pass from Peillat from the right.
India made several attempts to get the equaliser and even took Sreejesh off the field to inject one more player but it was not meant to be.
