Joachim Low's team will now face the Italians in the second Euro 2012 semi-final for a chance to meet Spain in Kiev.
Lahm said that the Azzurri would only have had themselves to blame if they lost the penalty shoot-out against the Three Lions.
"We watched the game at our hotel and England were comprehensively outplayed," Lahm told reporters.
"It should never have reached penalties, the Italians only had themselves to blame for allowing the game to reach that point. They were very wasteful in front of goal. If that had been Germany, we would have put England out of their misery during the 90 minutes.
"The only thing you can say is you must admire the way England managed to hang in and refused to go home quietly. When it went to penalties it could have been anyone's game.
"There are days when everything goes for you and others when they don't. But it would have been a massive injustice had Italy failed to win."
Lahm admitted Germany would have preferred to play England given their strong record against the Three Lions in previous tournaments.
The Bayern Munich full-back believes Die Mannschaft would have had a mental edge after the meeting of the two teams in the 2010 World Cup and was unimpressed with their efforts in Poland and Ukraine.
"We wanted England," Lahm revealed. "They carried less of a threat than Italy and history dictates that we always come out on top against the English.
"The other advantage of facing England is memories of us beating them 4-1 at the 2010 World Cup would have been at the forefront of their minds.
"And to be fair, Germany have improved since then whereas England have struggled, particularly at this tournament."
|7/2||Italy are 7/2 to beat Germany in Thursday's semi-final|
Germany head into Thursday's clash as favourites but Lahm recognised the threat posed by the likes of Andrea Pirlo and Mario Balotelli to their chances.
"We came into the tournament determined to reach the final and nothing has changed," Lahm continued. "As a team we're growing in confidence. We're getting stronger and stronger as we progress. Our preparations have been meticulous; we have taken everything into account, even practising penalties at every opportunity, if they're required.
"Our biggest challenge at this tournament still awaits us if we reach the final, but this is a team that will deal with anything that is thrown at us.
"Of course, Italy carry a threat. Pirlo is having a great tournament and is at the heart of everything good about Italy. It's important we address the threat and limit the time he has on the ball. And Balotelli is very dangerous if he's given time and space.
"We are on course to make history and we are in no mood to disappoint."