The United States lost 89-81 in the semi-final of the men's basketball tournament on August 27.
This is the third loss for U.S. in the tournament as they lost 94-90 to Lithuania and 92-73 to Puerto Rico to finish fourth in the preliminary round.
The U.S. team, which is fully composed of professional players, failed to claim the title for the second consecutive time in the international competitions as they finished sixth place in the World Championships in 2002.
"They executed great, and making shots, and it was very difficult to beat them in 40 minutes game if they can do that," said Larry Brown, head coach of the U.S. team.
"I think the reason they won is because they are familiar with each other and greatly coached. Our best player, Tim Duncan, never got opportunity to hurt Argentina. They did great job to take the game away from him. He got foul trouble, that's critical. "
Argentina, who defeated U.S. 87-80 in the 2002 worlds, outscored the Americans 27-19 to enter the fourth quarter thanks to 15 points from Emanuel Ginobili, a guard from the San Antonio Spurs.
Ginobili had 28 out of his game-high 29 points in the first three quarters to give Argentina a 70-57 advantage.
"It's our first time in the final of the Olympics and I am proud I'm member of this team," Ginobili said. "I feel extremely happy for our success because we proved the world we are a very good team and we made it against the professionals."
Talking about Duncan, his Spurs' teammate what was fouled out with 5:00 to go, Ginobili said, "Tim was really upset about the fact he was fouled out and he told me it's very difficult to adjust in the different rules, but he congratulated me and wished me luck."
Andres Nocioni celebrated the victory with 13 points and five rebounds, while Alejandro Montecchia adding 12, Walter Herrmann 11, and Luis Scola 10.
"We realized nothing is impossible," said Ruben Magnano, head coach of Argentina.
The U.S., whose all-time record in the international competitions dropped to 73-6, were led by Stephon Marbury's 18 points. Lamar Odom contributed 14 points and eight rebounds.
Argentina never trailed after the first quarter, which it led 24-20, and shot 11-22 on 3-pointers.