Shahar Pe'er came agonizingly close to advancing to the semifinals of the Australian Open on Tuesday morning, losing 3-6, 6-2, 8-6, to seven-time Grand Slam winner Serena Williams in a titanic battle the lasted two hours and 34 minutes. The Israeli came within two points of victory in the 12th game of the third set. But former world No. 1 Williams reeled off three straight games to complete the grueling win and break Israeli hearts worldwide. Pe'er, who will nevertheless equal Anna Smashnova's record ranking of 15 and even rise to 14 should Williams not win the tournament, failed to convert 10 of her 13 break points, with the American coming up with a big serve to deny the Israeli time after time. Pe'er's defeat means Israel is still searching for its first ever Grand Slam semifinalist and that unfortunately the 19-year-old has now followed in the footsteps of Shlomo Glickshtein and Amos Mansdorf, who were also knocked out in the quarterfinals of the Aussie Open in 1981 and 1992, respectively. "I'm eating my heart out. I was so close, but unfortunately I lost in a tight finish," Pe'er said after being knocked out. "I think I played very well throughout the tournament. I defeated good players. I lost 8-6 in the third set in a quarterfinal. "It's not the best result and it's pretty disappointing. But I just have to look at the positive side. I'm playing good tennis and next time I hope to step out there and take the match." Williams (81) was delighted with her win and was full of praise for her Israeli opponent's play on Tuesday. "I think it's amazing. Her performance and her play for all of Israel is great," the American said. "I couldn't be happier for her. She's obviously a solid player and has a very bright future. I think Israelis might be up at four in the morning a lot more." Pe'er got off to an ideal start to the match, winning her first service game to love. The Israeli took advantage of her opponent's slow start and broke in the second game of the set to take a 2-0 lead. Williams, who had 17 unforced errors in the first set, failed to find her rhythm and Pe'er held her serve comfortably on the way to a 6-3 first set win. The Israeli continued her positive play in the second set and her second love game of the match tied the score at 2-2. However, Pe'er's game began to unravel in the fourth game and Williams grew in confidence and streaked forward. "I started the match very well. But in the second set, I suddenly couldn't get the ball in the court. It was very strange," Pe'er said. The American made the most of the Israelis drop in form and wrapped up the second set in 30 minutes, after taking four consecutive games. Pe'er squandered three break points in Williams' first two service games of the third set, allowing her opponent to keep her nose in front (2-1). The American, who capitalized on five of her six break points during the match, broke the Israeli in the fourth game of the set and after securing the subsequent game with an ace grabbed a commanding 4-1 lead. Just when the match seemed to be drifting away from Pe'er, the teenager broke back and tied the set at 4 after another successful service game. The Israeli let three break points go begging in the following game with Williams repeatedly coming up with a huge serve under pressure. "It was 4-4 in the third set and I had three breakpoints. She aced me every time. There's nothing you can do. She was coming up with huge serves in the important points," Pe'er said. Pe'er fought to hold her serve in the 10th game of the set and finally got the elusive break of serve in the following game. The Israeli was two points away from a famous victory in the next game, but Williams took two straight points at 30-30 and tied the score once more (6-6). The break of serve boosted the American and she won eight of the next nine points to clinch a spot in the final four. "When I broke her serve and went to serve for the match, I wasn't tight or anything, I just went for my shots. But still my serve was not good enough," the Israeli teenager admitted. "She's a champion and she knows how to handle these situations. She was playing too good in the end and she was serving very, very well. I give her all the credit. "I just did everything I could today. One day you win and one day you lose. This is tennis. This is sport."