Down 18-0 after 30 minutes on Friday night, the Panthers mounted a memorable fightback but fell agonisingly short in front of 19,211 at Allianz Stadium.
A 75th-minute field goal to Sharks halfback Chad Townsend proved decisive as rival playmaker Nathan Cleary hooked his attempt to level the contest soon after.
The Sharks now meet arch-rivals Melbourne at AAMI Park next Friday night in what shapes as a mouth-watering preliminary final.
Cronulla were dealt a big blow when skipper Paul Gallen was taken off with a shoulder problem in the 48th minute, compounding the absence of Josh Dugan (shoulder) and Wade Graham (knee).
Luke Lewis is also under a cloud for next week because of a calf problem.
The Panthers came back from a 14-point deficit on four occasions this year but the task proved too big this time as their tumultuous season came to a close.
After the Sharks led 18-2 at halftime, the Panthers looked dead and buried against one of the best defensive sides in the competition.
However, they mounted a comeback after fullback Valentine Holmes allowed the ball to bounce in-goal and Cleary pounced to narrow the margin to 18-8.
A Townsend penalty goal gave the Sharks breathing space at 20-8 but Isaah Yeo set up a grandstand finish when he crashed over to reduce the deficit to just six with 13 minutes remaining.
When James Maloney fired Viliame Kikau through a hole, Waqa Blake scored to even it up at 20-20.
The Panthers appeared to be on the charge but Townsend potted his second field goal attempt, while Cleary was left to rue his miss from in front of the posts.
Earlier, the Sharks stormed out of the blocks and when Sosaia Feki batted back a Matt Moylan bomb for Holmes to go in under the sticks, at 14-0 they were scoring at just under a point a minute.
The Panthers had their chances in the first half but were their own worst enemy, with James Maloney and Dallin Watene Zelezniak turning over possession when in prime attacking position.
When Moylan put retiring veteran Luke Lewis through a giant hole, the Sharks took an 18-0 advantage and looked to be cruising, given Penrith only broke their duck through a Maloney penalty seconds before the break.
Sharks coach Shane Flanagan said he felt like his side were dead in the water.
"In the first half I was happy with our performance but in the second half, they got some momentum," he said.
"We couldn't get out of our end, possession swung and we were ready to be knocked out at about the 20-minute mark."
Panthers coach Cameron Ciraldo said he was always confident the Panthers were set to storm home.
"I didn't feel like we were going to lose for most of the second half," Ciraldo said.
"But they were good enough and experienced enough to ice it. That's what makes them such a great team."