Australia's women's rugby sevens team have blown a 12-point lead in a shock Olympic Games 21-12 semifinal loss to Canada.

The form team in Paris looked all but through to a blockbuster gold-medal showdown with defending champions New Zealand after early tries to Maddison Levi and Sariah Paki on Tuesday.

But a long-range try from Charity Williams on the stroke of halftime shocked Tim Walsh's side, who conceded again after errors from the restart and then watched in horror as Piper Logan darted from the scrum to seal an incredible Games upset.

Canada then held possession for the final two minutes to continue their dream run, after knocking off the hosts France in a quarter-final upset the previous night.

The Rio gold medallists Australia had won the world series final in Spain two months ago and were seemingly on track for an inevitable showdown with defending champions New Zealand for a second gold.

Instead they'll face the United States for bronze, with the shell-shocked Australians crouching to their haunches after the final siren on a stinking hot day in Paris wondering how it went so wrong.

AAP