Uruguay beat the world champions 5-3 on penalties after the two teams were level 1-1 after 90 minutes. Uruguay, who failed to qualify for last year's World Cup, have hosted the Copa America seven times and won on each occasion.
Against Argentina, Tulio appeared to control the ball with his hand before turning and scoring the goal which gave Brazil a 2-2 draw and took the game to a penalty shoot-out which they won.
Brazil outplayed Uruguay in the first half, taking a 30th minute lead through Tulio - his fifth goal in eight full internationals.
But a dreadful pitch prevented the world champions from playing to their full potential and Uruguay came back with their traditional tenacity in the second half with Pablo Bengoechea equalising from a free-kick in the 53rd minute.
The rest of the game was even, with Edmundo having a goal disallowed for offside and Francescoli seeing another free-kick saved by Taffarel.
Brazil's coach, Mario Zagalo, who promised before the game that his team would silence the Centenario stadium, made one change to the side who beat the United States in the semi-final, bringing Tulio in for Savio.
For the first time in the competition, the historic Centenario stadium, venue for the first World Cup final in 1930, was full. But the pitch, boggy and uneven, was still an embarrassment to the organisers.