The seven-time African champion Pharaohs defeated the All Whites 1-0 in their FIFA Series clash, courtesy of a Mustafa Mohamed penalty in the first half.
The game was part of the FIFA Series 2024 international window, with Egypt now progressing to take on the victors of Croatia and Tunisia in the final.
The decisive moment came after the on-field referee opted to wave the play on when New Zealand defender Nando Pijnaker collected Eman Ashour in a heavy challenge approaching the half-hour mark.
The Egypt players were pleading for a penalty to be awarded in their favour, with Ashour taking a heavy fall during the attacking move.
He left the pitch injured and was seen in tears on the touchline holding his shoulder with a suspected dislocation to the joint.
VAR checked the play, with the referee then changing his decision.
Mustafa Mohamed stepped up to ruthlessly dispatch the ball high into the back of the net for his 13th international goal past the hands of New Zealand keeper Max Crocombe in the 29th minute.
The All Whites created dangerous chances of their own as Sarpreet Singh and captain Liberato Cacace combined smoothly up front.
There were several opportunities for the taking for the All Whites which were denied by the opposition defence.
Auckland-born striker Max Mata's radar was off with a header directed narrowly over the top of the cross bar in the first half.
In the second-half, his shot from close range was saved by quick reaction from the keeper.
Egypt's Omar Marmoush had an incisive attack, but missed the finishing touches minutes later.
Sarpreet Singh won a free kick in the second-half to hit the bar in a solid attempt.
The Darren Bazeley-coached All Whites could not find the winning formula on Saturday morning as they looked to build on a promising last outing against the Republic of Ireland.
New Zealand will how head to the the playoff for third against either Tunisia or Croatia.
