Alphonso Davies opened the scoring on two minutes with a superb leaping header -- Canada's first goal in men's World Cup history -- but Croatia fired back twice before half-time through strikes from Andrej Kramaric and Marko Livaja.
Kramaric added another with a well-taken strike on 70 minutes, and midfielder Lovro Majer netted Croatia's fourth in added time to send Canada packing from the tournament.
The results means Canada remain without a point in Group F having lost both of their first two games, an insurmountable four points behind joint-group leaders Croatia and Morocco.
Canada flew out of the at the Khalifa International Stadium on Sunday with the fastest goal of the tournament so far and their first in the World Cup, after drawing a blank in their only previous appearance in 1986.
A long clearance from goalkeeper Dominik Livakovic eventually found its way to Tajon Buchanan, who shaped a superb cross from the right into the box where Davies was arriving like an express train to rise high above his marker and head powerfully down into the net.
The Canadians clearly had the bit between their teeth and they were carving through the Croatia midfield with Davies's pace and trickery causing nightmares for the Croatians.
Yet it was a half of two halves, as Croatia -- thoroughly outplayed in the early stages -- eventually shifted into gear.
They had the ball in the net after 26 minutes through Kramaric only for the linesman's flag to cut short their celebrations, but that was a temporary reprieve for Canada.
Croatia drew level in the 36th minute when Ivan Perisic, a growing influence on the left, slid the ball through to Kramaric who shot first time into the far corner.
They took the lead eight minutes later when a lovely build-up from the back ended with Livaja firing right-footed low into the net from the edge of the area after being fed by Mateo Kovacic.
Herdman rang the changes at halftime in an effort to claw back the initiative and substitute Jonathan Osorio curled an effort just wide shortly after the restart.
Yet their hopes of getting back into the contest were dashed when a curling cross from Perisic on the left was controlled by Kramaric, who shifted the ball on to his left foot and dispatched it low into the bottom corner in the 70th minute.
Deep into stoppage time, Croatia added a final blow when Mislav Orsic broke clear and unselfishly squared for Livaja to tap home.