A Golden point extra-time field goal to Bulldogs five-eighth Josh Reynolds broke a 10-10 deadlock with the scores level at fulltime at ANZ Stadium.
The Dragons hit the front late In the game 8-6 with a penalty goal to five-eighth Gareth Widdop.
But it was a try to Bulldogs forward Shaun Lane with only two minutes left that put the Bulldogs in front, 10-8.
However, more drama was to follow when the Dragons got a penalty from the kick-off for a Bulldogs player being ruled offside.
Widdop kicked a pressure goal with only seconds remaining from 30 metres out to level the scores at 10-10.
Widdop missed with a field goal attempt in the first chance in attack in golden point.
For the eighth-placed Dragons they fought hard all season making the finals for the first time since 2011.
Dragons lock Trent Merrin played his final game for the club as he has signed with Penrith for the next three years.
Winger Eto Nabuli, who scored the team's lone try, is headed to Super Rugby with the Queensland Reds.
Canterbury Bulldogs led 6-0 at halftime and former Dragon Brett Morris scored the only try of the first half in the 11th minute which was converted by Moses Mbye.
Morris scored off an side pass near the posts.
Early in the second half the Dragons winger Eto Nabuli had a try ruled no try by the video referee when Bulldogs fullback Brett Morris was able to ground the ball in time from a kick he fumbled.
The score remained in favour of the Bulldogs 6-0. The Dragons were boosted by the return of injured five-eighth Gareth Widdop and second rower Joel Thompson.
Dragons halfback Benji Marshall produced a mighty solo run where he jinked, stepped and swerved through the Bulldogs defence to score in the 46th minute but referee Jared Maxwell ruled obstruction and his ruling was supported by the video referee.
Benji Marshall left the field in the 51st minute after having his right ankle twisted in a tackle.
The low-scoring final was played in front of 33,854 people with plenty of red and white and blue and white colours in the crowd supporting both teams.
Dragons winger Eto Nabuli scored in the 69th minute in the left hand corner breaking the second half points drought. Widdop levelled the scores 6-6 with a might conversion from the quarter-line.
Leader man of the match, Dragons fullback Josh Dugan.
Canterbury 11 (Brett Morris, Shaun Lane tries; Moses Mbye 2 goals) defeated St George Illawaara 10 ( Eto Nabuli try, Gareth Widdop 3 goals). crowd: 33,854.
Best for the Dragons were Gareth Widdop, Benji Marshall until he was injured and fullback Josh Dugan and hooker Mitch Rein.
Dragons coach Paul McGregor has built a team that works hard and shows plenty of character in 2015.
