Williams, 36, was cheered on by superstar pals Tiger Woods and Lewis Hamilton while her good friend Meghan Markle was in the Royal Box.
But it was Kerber who put in a regal performance, crushing Williams 6-3 6-3 to win her third Grand Slam title.
The German collapsed on the SW19 turf after taking the win as she became the first German to be crowned champions since Steffi Graf in 1996.
An emotional Williams was almost crying at the end in her first Wimbledon campaign since giving birth to daughter Olympia.
It means she will have to wait for what would have been a 24th Grand Slam final.
Williams told the BBC: “It was such an amazing tournament for me. I was really happy to get this far. It’s obviously disappointing, but I cannot be disappointed, I have so much to look forward to and I am just getting started.
“I am just me, and that’s all I can be. To all the mums out there, I was playing for you today, and I tried but Angelique played really well, she played out of her mind. I look forward to continuing to be out here and do what I do best.
“She’s an incredible person, a really good friend, so I am really happy for her. I know she’s going to really enjoy it and enjoy the moment.”
Kerber was in inspired form on Centre Court but, in truth, Williams was never at the races.
She made too many unforced errors and uncharacteristically missed simple balls that she would usually put away with regularity.
It’s Kerber’s third Grand Slam win after taking the Australian Open and US Open title in 2016.
The German raced to her box after taking the crown before returning to lift the trophy.
She said: “It’s a dream come true, Serena you are a great person and champion, such an inspiration for everyone watching. I’m sure you win have your next Grand Slam soon so congratulations for coming back.
“I knew I had to play my best against a champion like Serena, it is always an honour to share a court with her. It is my second chance to play in front of you on Centre Court, I enjoyed every second of the last two weeks so thanks for all the support.
“I am the next German winner after Steffi Graf. Thanks to my box, my family and friends and my team watching at home. Without you I won’t be here, so thanks.”
Six-time Wimbledon champion Billie Jean King was courtside to watch the clash and believes Williams paid the price for a lack of fitness.
“Serena could never get any rhythm, if you can keep her out there long enough,” she said.
“Keep the rallies long, and see how fit she is… she looked a bit like she was sucking it up, out of breath a few times.
“Kerber always gets that one more ball back.
“I think we’ll see her back next year super fit because she will really want to win it badly.”