Mitch Langerak's Borussia Dortmund side were unable to send coach Jurgan Klopp out a winner, succumbing to Wolfsburg 3-1 in the DFB-Pokal final.
Klopp was denied a fairytale end to his seven-year reign at the German club as Wolfsburg came from behind to claim their maiden German Cup crown.
A compelling final at the Olympiastadion in Berlin saw Dortmund draw first blood after six minutes courtesy of Pierre-Emerick Aubameyang's stunning volley, before Luiz Gustavo reacted quickest to convert Naldo's rebound and restore parity.
Wolfsburg took command and were ahead on 33 minutes thanks to Kevin De Bruyne's magnificent long-range drive, and Bas Dost added a third with a powerful header.
Kagawa slid in to stab just wide after half-time, but Dortmund could not find a way back, denying Klopp a second Pokal title.
The win banishes any bad memories for Bundesliga runners-up Wolfsburg, who avenged defeat to Klopp's men at the semi-final stage of last year's competition to lift the trophy for the first time.
In contrast, it brings a disappointing end to Klopp's tenure at Dortmund, who fought back from being bottom of the league at the start of the year to earn a UEFA Europa League berth.
An action-packed first half saw Dortmund take the lead after just six minutes, when a teasing cross from Kagawa from the right was brilliantly met by Aubameyang, who beat the offside trap to volley home.
The lead was nearly wiped out just two minutes later, with Dortmund goalkeeper Mitchell Langerak – Klopp's sole change from the emotional win over Werder Bremen in his final home fixture at the helm - denying De Bruyne's low effort following some good work in the box by Dost.
Marco Reus should have extended the advantage 10 minutes later but could not keep his shot down after Aubameyang had broken free down the right, and his profligacy was soon punished.
A clever free-kick saw Langerak palm away Naldo's bending 30-yard strike, allowing it to fall kindly for Gustavo in the box – the Brazilian coolly slotting past the despairing Aussie goalkeeper.
The relentless pace of the game showed little sign of waning and Langerak found himself picking the ball out of the net again just after half an hour, thanks to De Bruyne's superb 25-yard drive.
Klopp's dream send-off was dealt a further blow five minutes later when Dost rose highest to head home Ivan Perisic's cross as a resurgent Wolfsburg seized the initiative.
Dortmund tried to respond but Aubameyang fired wide when found by Kagawa again shortly before the break.
A mistake from Erik Durm meant Langerak had to be alert to deny Daniel Caligiuri at the start of the second half, before Kagawa slid in to poke just wide at the other end moments later.
Only a deflection from Durm prevented Dost from doubling his tally on 66 minutes as Dortmund struggled to find the inspiration needed for a comeback.
Sebastian Kehl's final outing was brought to an end when he was replaced by Lukasz Piszczek in the 68th minute, before Kagawa forced a smart save from Diego Benaglio, who also did well to parry Aubameyang's free-kick five minutes from time.
But Dortmund's efforts were ultimately fruitless as they signalled the end of an era with a disappointing defeat.