Automatic World Cup qualification is now out of Australia's hands after Japan claimed a 2-0 win in Tokyo.
A win would have sealed a spot at Russia 2018 for Australia, but victory ensured it was Japan and not the visitors who left with a ticket booked.
Takuma Asano and Idedguchi Yosuke scored the goals to break Australia's hearts, with the Socceroos now needing to beat Thailand next Tuesday and hope Japan beat or draw with Saudi Arabia a few hours later.
Pre-match, Ange Postecoglou had flagged Australia's intentions to dominate the match, and his players made a go of doing just that throughout a rapid first half.
Australia's movement of the ball through midfield was crisp and effective, but the moves inevitably fell down in the final third as the lack of a recognised striker made genuine chances hard to come by.
But for 40 minutes, the Socceroos could argue they had shaded the match, and had Mat Leckie's deflected shot crept inside the post rather than off it and out, the half could have ended in much different circumstances.
Instead, only moments later the hosts would take the lead. Though they dominated the shot count for the first 45, the Blue Samurai rarely troubled keeper Mat Ryan until the breakthrough came.
And it came as a result of an error from left-back Brad Smith, who inexplicably allowed Takuma Asano a free run into the penalty area to prod home a smart cross.
Any foothold Australia had quickly disappeared in the second half though, as Japan's forward interchanges became more telling and Australia's lack of a focal point became a serious issue.
Postecoglou attempted to address the problem by bringing on both Tomi Juric and Tim Cahill in quick succession, but their introduction could only muster a handful of goalmouth scrambles and nothing to seriously concern Japan's keeper Eiji Kawashima.
As Australia pushed forward, the gaps at the back became wider and Japan remained the more likely team to score.
Ideguchi very nearly found the back of the net on one such break, but his shot was blocked quite incredibly by Trent Sainsbury, one Socceroo whose head could be held high at the end of the night.
But Ideguchi was not to be denied. Cutting inside onto his right foot, his rasping shot from the edge of the area was destined for the top corner of Ryan's net from the moment it was struck.
While the Japanese celebrations begin, Australia quickly needs to address its profligacy going forward ahead of the match against Thailand — a game the Socceroos may need to win by a heavy margin with goal difference a factor in Group B.
The 2018 World Cup still feels a long way away for Australia.