Gonzalez dispatched the first of his kicks on 71 minutes to level the match at 1-1 following Robinho’s early opener and then fired home the decisive kick in the shoot-out to send Brazil home and set up a last-four clash with Argentina.
Brazil had looked to be heading towards that mouthwatering tie with Lionel Messi’s side after Robinho’s goal on 14 minutes.
Having weathered the early Brazil storm, Paraguay then conceded just as they appeared to be warming to their task, Dani Alves’ low cross left by Liverpool-bound Roberto Firmino for Robinho to slot home at the far post.
Paraguay’s response was impressive, forcing a series of corners and Alves’ subsequent duel with Edgar Benitez proved to be the defining battle for the rest of the first-half with the Barcelona man struggling to contain the Paraguay winger.
But for all their enterprise, Paraguay couldn’t force a clear first-half opening, Roque Santa Cruz dragging a shot wide from the edge of the box as Brazil defended well.
Still, Paraguay were undaunted and continued to press after the break and after Alves was booked for scything down Benitez, Gonzalez almost surprised Jefferson with a whipped free-kick at his near post.
Nelson Valdez then looped a header just over before Paulo de Silva’s downward header forced another smart save as Brazil began to look ragged.
And Paraguay’s breakthrough came from the spot as Thiago Silva allowed the ball to hit his hand as he jumped to contest a header in the box – Gonzalez’s penalty beautifully struck to the right of Jefferson, who guessed the right way but could do nothing to keep it out.
That set up a frantic finale, with both sides seemingly reluctant to take the game to penalties, but neither side could fashion a telling chance, leaving Gonzalez to provide the critical moment after Everton Ribeiro and Douglas Costa had missed from 12 yards.