Sarina Wiegman's side were second best throughout the last-16 clash and went down to 10 players in the dying embers of normal time, as Lauren James was given her marching orders for an inexplicable stamp on Michelle Alozie.
However, England's depleted team stood firm in extra time and held their nerve from 12 yards to seal a place in the last eight, where they will take on Colombia or Jamaica.
The Lionesses welcomed integral midfielder Keira Walsh back to the team with open arms following her knee injury, as the Barcelona star's return forced Katie Zelem down the bench.
However, Nigeria entered the half-time break the more satisfied, having witnessed Leicester-born Ashleigh Plumptre strike the bar with a ferocious long-range strike in the 16th minute, before the former England youth international was denied by a full-stretch Mary Earps save not long after.
If England had breathed a huge sigh of relief when Plumptre's thunderbolt hit the woodwork, the Super Falcons were counting their lucky stars in the 34th minute, as Wiegman's side thought they had been awarded a spot kick when Rachel Daly was bundled over by Rasheedat Ajibade.
However, upon a check of the monitor, referee Melissa Borjas controversially overturned the decision, ostensibly deeming the contact as more of a coming together between the two players.
A bemused England were on the back foot immediately after the restart, and the frame of the goal came to the Lionesses' rescue within the first 80 seconds of the second half, as Uchenna Kanu met Ajibade's cross to the back post and clipped the bar with a looping header.
Kanu once again rose highest to meet a 72nd-minute corner, but the 26-year-old's effort flew just wide of Earps's far post, before Daly's own bullet header from a corner was kept out by a smart stop from Nnadozie four minutes later.
As the game entered its dying embers, things went from bad to worse for England, as James - one of the Lionesses' stars of the tournament - inexcusably stamped on Alozie while the right-back was on the turf; the Chelsea attacker was initially booked before her punishment was upgraded after a VAR review.
England held out to force extra time, but Wiegman's 10-woman side were handed a massive reprieve in the 93rd minute, as Lucy Bronze escaped conceding a penalty despite barging Alozie in the back.
Wiegman's defenders earned their keep in the second period of extra time, where Earps was only called upon to stop a 118th-minute Asisat Oshoala shot that was straight down her throat, and she would potentially be required to replicate her previous heroics in the penalty shootout to keep England's World Cup hopes alive.
However, Earps would not need to get her gloves dirty in the shootout, as Desire Oparanozie missed Nigeria's first spot kick after Georgia Stanway had also sent her penalty wide for England, before Alozie sent a wild attempt over the bar.
Bethany England, Daly and Alex Greenwood were all on target for the Lionesses, before Euro 2022 final hero Chloe Kelly stepped up to the chalk with the chance to send England through, and her penalty had too much venom for Nnadozie to keep out.