Croatia stunned highly-fancied Germany in Klagenfurt to take a huge stride towards a place in the Euro 2008 quarter-finals.

Darijo Srna and Ivica Olic were the scorers as Slaven Bilic's Croatia produced arguably the first major upset of the tournament to date in recording only their second ever victory over Germany.

Lukas Podolski pulled a goal back late on for Germany - his third in two games - to set up a nail-biting finale, but there was to be no way back for Joachim Low’s team, who finished with 10 men following the 90th-minute dismissal of Bastian Schweinsteiger, the substitute.

Both sides came into the game having won their opening matches, although Germany had looked far more impressive in seeing off Poland than Croatia had in defeating Austria.

However, it was Slaven Bilic’s side who turned on the style at the Worthersee Stadion as they took control of Group B with maximum points from two games.

After a frantic start Croatia took the lead after 24 minutes from the first clear-cut chance of the game. Danijel Pranjic sent over a superb cross from the left and Srna nipped in front of marker Marcell Jansen to slide the ball in at the far post, Germany goalkeeper Jens Lehmann left with no chance.

Barely five minutes later, Niko Kranjcar wasted a gilt-edged chance to make it 2-0. Ivan Rakitic chipped a pass into the area which was flicked back towards the penalty spot by Olic, but the in-rushing Kranjcar was unable to cap a well-worked move as he blazed over.

Germany knew they needed to step up through the gears and they finally made Stipe Pletikosa earn his keep in the Croatia goal with two efforts in rapid succession.

The first saw Pletikosa push away a thunderous Michael Ballack free-kick, before the Spartak Moscow custodian awkwardly deflected away a Christoph Metzelder effort with his knee. Metzelder then headed a Torsten Frings corner just over from seven yards out as the Germans stepped up their efforts for an equaliser before the break.

However, Low’s side very nearly found themselves two goals behind just before the interval and it needed a fine reaction stop from Lehmann to deny Kranjcar, who chested down Olic’s pass and smashed in a first-time volley.

Having seen his side let off the hook, Low opted for a more adventurous approach in the second half as he sacrificed Jansen, the full back, for David Odonkor, a jet-heeled winger.

Aside from a Ballack shot over the crossbar though, Croatia looked comfortable and also had a decent effort of their own with Luka Modric firing in a shot that Lehmann gathered, although not before seeing it squirm through his hands first.

The former Arsenal goalkeeper’s next task was to pick the ball out of the back of his net as Croatia stunned the Germans with a second goal in the 62nd minute. Rakitic's cross from the right took a deflection off Podolski before arrowing goalwards and although Lehmann, who had begun to come out for the initial cross, managed to dive backwards and get a hand on it, the ball struck his near post before rebounding back out to Olic, who had the easy task of slotting home.

Germany looked for an immediate response but aside from a Schweinsteiger shot that fizzed across the face of goal, they were still finding it difficult to create chances against a well-organised Croatia backline.

They finally grabbed a lifeline with 12 minutes to go though when Podolski superbly lashed home a shot on the half-volley after the ball had fallen kindly to him in the box.

Germany could not build on that goal, though, and their final hopes of getting anything out of the match all but disappeared when Schweinsteiger was given a straight red card for shoving Jerko Leko to the ground.