England need only a draw with Croatia on Wednesday to reach Euro 2008 after Russia lost 2-1 in Israel.
Steve McClaren's men knew that a win for Russia would virtually end their qualification hopes but in a dramatic finish the Israelis found the winning goal with the match locked at 1-1.
Israel had taken a 10th minute lead when Elyaniv Barda latched onto Barak Itzhaki's pass through the centre and beat the goalkeeper with a cool strike with the outside of his right foot.
Russia, who had lacked urgency in the opening 45 minutes, put England's hopes back in the balance again when Diniyar Bilyaletdinov fired in an equaliser on the hour mark and the visitors looked hot favourites to go on and get a winning goal.
England's hearts were in their mouths as Russia poured forward and there was a huge scare in the final minute when substitute Dmitri Sychev burst into the box and struck a shot against the outside of the post.
But with Russia leaving big gaps at the back, Israel sneaked an unlikely injury-time winner as second-half sub Omer Golan ran onto a loose ball and beat goalkeeper Vladimir Gabulov.
A draw would have left England needing to beat Croatia so Israel's late winner took on even more importance.
Now McClaren's men need only avoid defeat on Wednesday to reach next summer's finals and they will up against a team which has already qualified.
Asked afterwards whether he thought England would get the result they need, a deflated Russia coach Guus Hiddink said on Spy Sports News: "At home, they are capable of doing so. We have to be realistic and honest about that.
"I have hope, but let's be realistic. They can do what they want."
Hiddink insists whoever finishes first and second in the group are worthy of a place at Austria and Switzerland.
"It's not about luck," he said.
"This young team were very close but, in the end, if you don't make it, if you're not first of second in qualifying, you must be quiet and not say it's luck.
"If you're one and two, you deserve to go."
England can still even top their group after another twist on Saturday, as group leaders Croatia slipped to a 2-0 defeat in Macedonia.
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