The Paris St Germain forward curled in a first-time right-foot shot from Rodrigo Bentancur's pass to beat Portugal goalkeeper Rui Patricio before limping off injured in the 74th minute as the Uruguay defence dug in to hold on to their lead.
Meanwhile, European champions Portugal go home, Ronaldo and Lionel Messi bowing out of the competition on the same day.
"We must congratulate Uruguay because they are the national team that are in the quarter-finals", Ronaldo said after the 2-1 loss last night.
Uruguay didn't concede against Egypt, Saudi Arabia or Russian Federation in the Group Stages, as they topped Group A, and their opening goal against Portugal was an ominous sign for the Europeans. Forging a simply unstoppable partnership with Suarez, Uruguay look like scoring every time they come forward.
Cavani limped off the field in the 74th, helped by Ronaldo.
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It was a bitterly frustrating game for Ronaldo as he was marshalled by Uruguay's solid central-defensive pairing of Diego Godin and Jose Gimenez.
Santos said his side had studied their opponents but that it was impossible to legislate for Uruguay's first goal, which featured a superb interaction between Luis Suarez and his strike partner Cavani.
Against a stronger-looking Portugal and Cristiano in good form, Oscar Tabarez's men channeled their inner goliath to pave a path to their second quarter-final appearance in the last three World Cups.
The match began on the back of a thrilling France versus Argentina encounter, a seven-goal fest that whet the appetite like a neatly crafted entrée at a luxury dinner.
55' - GOAL! Uruguay 1-1 Portugal: Portugal finally breach Uruguay's defence!
It was Cavani who instead took the spotlight.
Like Messi, Ronaldo has never scored in a knockout round match at the World Cup.