Second-half goals from Cristan Lara and Agustin Delgado in Quito mean that Argentina, who would have made sure of their place in Germany if they had won, will now have to try again in Wednesday's meeting with Brazil.
Colombia trounced Peru 5-0 in steamy Barranquilla and Marcelo Salas became Chile's all-time leading scorer after hitting the target in the 3-1 win over Bolivia, ending a four-year wait for his 35th international goal.
Venezuela were held 1-1 at home by Uruguay in the night's other tie, which ended with scuffles between the players.
Argentina still lead the 10-nation South American group with 28 points from 14 games while Brazil, who are four points behind, meet Paraguay in Porto Alegre on Sunday to complete the weekend's fixtures.
Third-placed Ecuador have 23 points followed by Paraguay (19), Colombia, Uruguay and Chile (17), Venezuela (15), Peru (14) and Bolivia (13).
NO EXCUSES
Argentina coach Jose Pekerman rested several top players and refused to blame Quito's high altitude after the first defeat in eight games since he took over.
"There are no excuses," he said. "We have to hand the merits to Ecuador."
Fullback Neicer Reasco weaved his way through the Argentine midfield and laid the ball off for Lara to score from the edge of the area in the 54th minute.
Then Lara tricked his way past his marker and crossed for Agustin Delgado to head the second in the 90th.
Argentine midfielder Esteban Cambiasso was sent off for elbowing an opponent in the scuffle which followed.
There was also trouble in Maracaibo, where Venezuela coach Richard Paez accused Uruguay captain Paolo Montero of provoking his players.
"He leaves a lot to be desired for a player of his experience," Paez said.
Spanish league top-scorer Diego Forlan lobbed Uruguay ahead after two minutes with his sixth goal of the qualifiers.
Uruguay had Carlos Diogo sent off for an off-the-ball incident before halftime and Venezuela levelled with a 25-metre strike from Giancarlo Maldonado in the 73rd minute.
In Santiago, two headers by defender Luis Fuentes gave Chile a 2-0 halftime lead over Bolivia before Salas added the third in the 67th minute.
Salas, whose career has been plagued by injury, had been level on 34 with his former striking partner Ivan Zamorano since 2001. His last goal came against the same opponents.
Chile's Sebastian Gonzalez was sent off before halftime and Bolivia pulled back a goal with an 83rd minute penalty by Jose Castillo.
Chile, who fired coach Juvenal Olmos in April, were playing their first game under his replacement Nelson Acosta, who was in charge of Bolivia when Chile won 2-0 in La Paz last year.
Luis Gabriel Rey, Elkin Soto, Juan Pablo Angel, John Javier Restrepo and Edixon Perea shared the goals as Colombia, who had scored only twice in their previous six qualifiers, found their scoring touch.
Peru, playing their first competitive match under new coach Freddy Ternero, were left off lightly as Mario Yepes missed a first-half penalty for Colombia, who also wasted several late chances.
