Uruguay's players (L to R), Egidio Arevalo Rios, Diego Perez, Diego Godin and Ignacio Gonzalez walk off the pitch dejected after their 2010 World Cup semi-final soccer match lost against the Netherlands at Green Point stadium in Cape Town July 6, 2010. [Agencies]

MONTEVIDEO - Uruguayans bade farewell to their dreams of World Cup glory on Tuesday but the mood remained festive on the streets of the capital as soccer fans agreed that "La Celeste" had done them proud.

Uruguay, who won the sport's ultimate prize in 1930 and 1950, succumbed 3-2 to the Netherlands in their first World Cup semi-final in 40 years.

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"I'm proud of the team. Sad because we were close, but happy because we went out with our heads high," said Milton Quintana, 45, one of thousands of fans who gathered to watch the game on a giant television screen in Montevideo.

"They fought to the last, never giving up, refusing to surrender," said sports commentator Mario Bardanca.

Tuesday's typically gutsy performance is likely to reaffirm Uruguayan pride in the so-called Garra Charrua, which literally means the Charruan claw, a term used to refer to fighting to the bitter end. The team are commonly nicknamed "Los Charruas" after a long-lost indigenous people.

"They gave it their all. We should keep on celebrating the claws that these players have," said Huber Morales, 32.

"They played how they should have done, giving everything they could as they struggled to get a draw," said sports journalist Ricardo Pineyrua. "We're happy because we showed the world we're fighters to the last, but there's sadness to because perhaps we deserved to reach the final."

Uruguayan President Jose Mujica, 75, who was unable to travel to South Africa on health grounds, said the team had gone out of the tournament with dignity.

"If we'd have had five minutes longer we would have won," He said according to the news website www.montevideo.com.uy. "We lost, but we kept our dignity."