After losing late on against France, Aidy Boothroyd made five changes for Saturday's (AEST) clash in Cesena including dropping Phil Foden, but England had to rely on goalkeeper Dean Henderson to keep Romania at bay in the first half.
Aaron Wan-Bissaka — heavily linked with a move to Manchester United — scored the own goal that cost England a point in its opening match, and his replacement Jonjoe Kenny was at fault for Romania's first goal when he brought down substitute Florinel Coman in the box.
George Puscas made no mistake from the spot, setting up a remarkable final 20 minutes.
Demarai Gray's exceptional strike levelled proceedings three minutes later, only for Fikayo Tomori to gift the ball to Ianis Hagi, son of Romania great Gheorghe, who restored Romania's lead with a superb goal.
England was swiftly level again, however, when Tammy Abraham turned home from a tight angle.
But another calamitous mistake then did for England, Henderson spilling Coman's long-range strike over the line before the Romania winger rounded off the win with a venomous volley in stoppage-time.
England's defeat meant France needed just a point from its clash with Croatia to send Boothroyd's side home and put itself in the driving seat for at least a top two finish.
Les Bleus wasted little time in taking the lead, Moussa Dembele heading home in the eighth minute.
Sandro Kulenovic hit the post and Nikola Vlasic went close as Croatia rallied in the second half, but Dembele's early effort ultimately proved enough to seal the points.
France's win also condemned Croatia to an early exit, and Sylvain Ripoll's side's clash with Romania on Tuesday (AEST) will now decide which side tops Group C, although both teams have given themselves a strong chance of progressing into the semi-finals as the best second-placed side regardless.