Hossam Abdelmaguid rolled in the winning spot-kick after Harry Souttar and Lucas Herrington missed from 12 yards for the Socceroos as Egypt recorded its first win in a FIFA World Cup knockout match.

Emam Ashour had given Egypt the lead with a 13th-minute header before an own goal by Mohamed Hany 10 minutes into the second half levelled the scores.

Mohamed Salah was an unexpected inclusion in Egypt's starting line-up, the forward recovering sufficiently from a hamstring strain to take up his customary position on the right of the attack.

Cristian Volpato gave the African side an early scare with a dipping strike from distance that clipped the top of Mostafa Shoubir's crossbar but Hossam Hassan's side was soon in front.

Jackson Irvine needlessly gave away a free-kick to the left of the penalty area when he upended Mostafa Zico and, with the defence only half-clearing Ashour's initial centre, the winger popped up to head Karim Hafez's pinpoint cross beyond Australia goalkeeper Patrick Beach.

Omar Marmoush threatened briefly and Australia's Aziz Behich forced Shoubir to drop to his right to gather before Volpato, the Socceroos' most creative outlet in the opening half, curled a stoppage-time strike wide.

Australia was fortunate not to go further behind within 10 seconds of the restart when Marmoush slid his shot across goal with Beach beaten and it was soon level.

Aiden O'Neill picked himself up after being fouled on the left to deliver an inswinging free-kick into the six-yard box, prompting Hany to flick a header into his own goal.

Beach pulled off a brilliant reflex save deep into stoppage-time to take the match into extra-time, the Melbourne City goalkeeper pawing Ramy Rabia's header over the bar while Haissem Hassan's effort was deflected to safety by Souttar's outstretched knee.

An unmarked Mohamed Salah, who had been muted throughout regulation time, thumped Marmoush's lay-off over the bar three minutes into the extra period to grant Tony Popovic's side a reprieve with Egypt increasingly dominant.

Beach made way for Mat Ryan between the posts as Popovic attempted to make use of the 34-year-old's experience, but Souttar fired the first spot-kick over the bar to hand the Pharoahs a crucial early advantage.

Mahmoud Saber, Ramy Rabia and Salah were all on target for Egypt with Irvine and Awer Mabil converting for Australia before Herrington rattled the crossbar in the fourth round and Abdelmaguid stepped up to send Egypt into the Round of 16.

Socceroos midfielder Irvine congratulated Egypt on its historic win after the game, but couldn't hide his disappointment through teary eyes.

"We took it all the way to the end and this is such a cruel way to lose," he said.

"It takes a big heart to step up and take a penalty after a game like that today, so I hope Australia gets behind those guys [who missed] and gives them their support."

"We said we're a champion team, our strengh is in the team, as a unit we do everything together, we win together, we lose together.

"Its just beginning for a lot of these guys. We have a big Asian Cup coming up in six month. We'll pick ourselves up and get back to where we want to be."

Asked about the decision to switch his goalkeepers before the shootout, Popovic said: "I think that was always an option for us with [Ryan's] experience.

"Then you've got to see how the game plays out, and sometimes in extra-time players go down and you need to make the changes and you don't have a sub available, but we still had one available with a couple of minutes to go, and we put Maty on."

Popovic also expressed his pride in Souttar and Herrington after their heartbreaking misses.

"It's not a moment to think about that now. That will come, I'm sure. I’m extremely proud of them," he added.

"I haven't even thought about the players who missed the penalties. Unfortunately, we go home and the World Cup ends for us."

Egypt’s first win in a knockout game at a FIFA World Cup sets up a Round of 16 meeting with Argentina or Cape Verde in Atlanta next week.

"It's history," Egypt captain Salah said.

"I told the boys before the game, 'Guys, this is the biggest stage you could play in your life, so just enjoy it. Don't let the pressure get into you and not enjoy the moment'.

"I'm glad that we managed to win the game. Bad luck for them [Australia], they lost on penalties but I'm happy that we wrote history today."