Dunga admitted that he had not expected Brazil to lose to Holland following their dramatic 2-1 defeat in Port Elizabeth, while he could now stand down as manager.
Brazil had looked strong contenders for World Cup glory in their earlier matches and took the lead against Holland through Robinho.
However, uncharacteristically poor defending in the second half allowed Holland to turn the tie in their favour thanks to an own goal from Felipe Melo and a Wesley Sneijder header.
Melo was then sent off moments later and Brazil were unable to find an equaliser with just 10 men, leaving boss Dunga to reflect on where it went wrong.
He pinpointed Melo's dismissal as a key moment and conceded that his side's poor showing after half-time had come as a surprise.
"We are all extremely sad and we didn't expect it," said Dunga.
"We were not able to maintain the same rhythm in the second half.
"If you play with only 10 players against a quality team like Holland then it makes it difficult."
Asked about his future, Dunga indicated that he would not be continuing in the job.
"We knew when I started that I would be here for four years," said Dunga, who took charge after the last World Cp in 2006.
"It's sad, it's difficult, nobody prepares to lose."
Goalkeeper Julio Cesar was as shocked by the result as Dunga but told his team-mates to try and not get too downbeat.
"It's not the end of the world," Cesar told a television reporter as a tear rolled down his face.
"I just think now we have to leave with our heads held high.
"In Brazil people always put a lot of pressure on us. This was a result no one expected. Every game Brazil enters, we enter to win."