Croatia had taken the lead thanks to a Andrej Kramaric finish, before Real Madrid's Dani Ceballos hit an equaliser.
The home side had got back in the lead thanks to a Tin Jedvaj header, but their lead was about to be taken.
A ball from the right side of the goal was fizzed in and seemed to hit the arm of Vrsaljko, but he argued that his had was too close to his body for it to be a penalty.
Regardless, the referee gave the decision and Sergio Ramos coolly slotted the kick in to the bottom left corner.