It's the sixth straight medal round game that the Russians have beaten the Canadians by one goal.
Russian captain Anton Volchenkov's goal at 6:51 of the third period proved to be the winner. Alexander Frolov, Stanislav Tchistov, Alexander Polushin and Iouri Troubatchev had the other Russian markers.
Chuck Kobasew had two goals for Canada. Brian Sutherby and Scottie Upshall also scored, while Jason Spezza had two assists.
Jason Spezza, left, slides into Andrei Medvedev in Friday's 5-4 loss.(CP Photo)
With 35 seconds left to play, the Canadians were given one last shot to tie the game when Mike Cammalleri was pulled down at the Russian blueline. Canada pulled goaltender Pascal Leclaire for a 6-on-4 man-advantage, but they couldn't put anything past Russian netminder Serguei Mylnikov.
Leclaire, who had the best goals-against average and save percentage at the tournament, didn't have his best game as Canada failed in its attempt to capture gold for the first time since January 1997.
Canada, which won bronze in 2000 and 2001, also settled for silver in 1999 after losing to Russia in overtime in Winnipeg. The Canadians beat the Russians 5-2 in their round-robin game earlier in the tournament.
Finland won the bronze by defeating Switzerland 5-1.
With Volchenkov in the penalty box, Kobasew collected his second goal of the game from a pass from Dan Hamhuis at 4:31 to tie the game at four.
But just over two minutes later, Volchenkov made amends for his bad penalty when he whipped a shot right off a faceoff through traffic and past Leclaire for the game-winner.
If the Canadians could take anything back, it would be a 12-minute span in the second period.
Russia scored three unanswered goals in the second to take a 4-3 lead going into the final frame.
After Upshall scored to make it 3-1 for Canada 37 seconds into the second, the Russians pulled starting goaltender Andrei Medvedev in favour of Mylnikov. The goaltending change seemed to motivate the Russians.
Tchistov started the Russian charge with a power-play goal at 5:16. The slick forward pulled in a long lead pass, split two Canadian defencemen then slid the puck under Leclaire to cut Canada's lead to 3-2.
The Canadian defence became unglued after Tchistov's goal.
Polushin skated into the Canadian zone untouched and brought the puck from his backhand onto his forehand and flicked it past Leclaire into the far corner of the net to tie the game 3-3 at 11:32.
Troubatchev gave the Russians their first lead of the game just under two minutes later when he hammered a bouncing puck from point-blank range past Leclaire.
Spezza had Canada's best chance of the second period when he skated end-to-end only to ding a slapshot off the post with 1:26 left in the frame.
Canada led Russia 2-1 after a feverish opening period.
Sutherby gave Canada an early 1-0 lead just 22 seconds into the game.
Defenceman Jay Bouwmeester kept the puck in the Russian zone and fired it towards the net. Canadian captain Jarret Stoll managed a weak shot which Medvedev couldn't corral and Sutherby buried the loose puck into the net.
The Canadians got a little help on their second goal of the period when Medvedev's own defenceman knocked him out of position, allowing Kobasew to one-time Garth Murray's cross-ice pass for a 2-0 lead at 7:12.
But the Russians came charging back 32 seconds later.
Frolov skated behind the Canadian net and stuffed a wrap-around through the pads of Leclaire.
