Gabriel and his team-mates dominated in Porto Alegre during Thursday's quarter-final, but found no way past a resolute Guarani side.
Willian hit the post and Alex Sandro forced a stunning save from Roberto Fernandez late in the clash, while the Selecao also saw a penalty decision reversed by VAR early in the second half for a foul that also earned Fabian Balbuena a red card.
Even with 10 men, Paraguay refused to budge, sending the game to penalties after a 0-0 draw at 90 minutes.
It was an identical situation to quarter-final matches in 2011 and 2015, both won by Paraguay, but this time fortune was on Brazil's side as Derlis Gonzalez missed the decisive last kick before Gabriel slotted past Fernandez to seal a 4-3 win for the hosts.
"I couldn't convert the penalty. I left annoyed, sad, p*ssed off with myself because I didn't take it my way," he confided to SporTV at the final whistle.
"We all agreed I didn't take it as I should have. I think I was a bit anxious.
"Today, after [Brazil assistant coach] Clebinho watched, I said I was going to take it, I was confident. I took it my way and I scored.
"In the game before I didn't look at the keeper and I went for goal. This time, looking at the keeper, calm, collected, I saw him moving for the left and sent it the other way."
Brazil's win sets up a mouth-watering potential clash in the semi-finals against arch-rivals Argentina.
The team captained by Lionel Messi, however, will have to get past Venezuela in Friday's clash in order to book their place in the last four.
The Selecao are out for their first Copa win since 2007, having failed to get past the quarter-final stage once in the previous three editions of the South American tournament.