Montreal Impact prevailed 1-0 as Thierry Henry's men ended Toronto's 18-game unbeaten streak in MLS on Tuesday.
Eastern Conference leaders Toronto had the chance to tie the record for consecutive regular-season matches without defeat, but they were upstaged by their Canadian rivals.
A 14th-minute header from Rudy Camacho was the difference at BMO Field in Toronto, where the Impact defender was left unmarked to head home Romell Quioto's cross.
Toronto thought they had equalised via the penalty spot in chaotic scenes in first-half stoppage time, following a foul on Jozy Altidore.
Alejandro Pozuelo and Pablo Piatti combined, the former rolling the ball forward for the latter to fire a penalty past Impact goalkeeper Clement Diop.
Referee Drew Fischer, however, ruled out the goal after Piatti was judged to have entered the penalty area before Pozuelo passed the ball forward.
In the 95th minute, Montreal's Emanuel Maciel was sent off for a challenge on Toronto captain Michael Bradley but VAR downgraded the card to yellow.
Toronto remain a point clear of Columbus Crew in the east, while Montreal are five points off the pace in fifth.