The Danes had the ball in the net first but Joachim Andersen’s effort was ruled offside when the passer Thomas Delaney was found to have been centimetres offside.
Not long afterwards, Anderson gave away a penalty after a VAR check, with the use of the snickometer, found he had handled the ball.
Kai Havertz tucked away the 53rd-minute spot-kick and Jamal Musiala added a second for Germany to progress to the quarter-final.
"The result was decided by two VAR decisions. I have the photo here - it was one centimetre," Hjulmand said, holding up his smart phone with a picture of the VAR decision.
"It doesn't make sense. This is not how we are supposed to be using VAR - it's one centimetre - and after a few minutes there was a penalty.
"I'm so tired of the ridiculous handball rules. We cannot require our defenders to be running with arms like this,” he added, pressing his arms to his side as he demonstrated to reporters at the post-match press conference.
"Joachim was running normally, he jumped up and was hit from one metre. I rarely talk about these decisions but it was very decisive for this game. It's frustrating for our team. Being in front 1-0 would have changed everything."
The visibly frustrated Danish coach, however, said he was still in favour of the system.
"I’ve always liked VAR. I think that technology can do something good for the sport. I also think it should be quicker. There has to be a way to improve it. I think that generally VAR is a good idea, but sometimes I can doubt it."
Hjulmand said Denmark had come up against tough opponents.
"We were pressured the first 15 minutes. It was pure survival," he said.
The Danish remain ambitious and Hjulmand, who still has a contract to lead the team, predicted a potentially bright future.
"But there's just one thing that is lacking. We need to be able to create more chances. We need to be more direct. We have a lot of young players.
"Our ambition is to get closer to the big favourites. Croatia has had a great phase for years. And that's where we want to be. It was only a few details that decided the game today."
