Alipate Raitini''s 78th minute try and Julien Caminati's conversion meant Toulon were beaten at the death 22-21 by Grenoble at the Stade Felix Mayol.
Jonny Wilkinson had kicked seven penalties to open up a 21-15 lead for the European champions with time running out, before his misguided pass fell into Raitini's hands.
Toulon had not lost at home for 363 days prior to today's fixture, leaving the crowd in shock at the nature of Saturday's dramatic loss.
The defeat means Toulon will lose ground in the top four, with Castres winning on Friday night and league leaders Clermont set to play tomorrow against Toulouse.
The visitors kept themselves in the game thanks to the boot of scrum-half Valentin Courrent and a drop goal from captain Fabien Gengenbacher, before turning the game on its head with Raitini's late interception.
Replacement Julien Caminati did the rest to push Grenoble into a lead that with only two minutes left Toulon were unable to overcome.
Grenoble's win - their ninth of the season - lifts them up to 5th momentarily in the Top 14.
Pens: Wilkinson 7
Yellow Card: Mitchell
Pens: Courrent 4
Drop Goal: Gengenbacher
Yellow Card: Thiéry
Toulon: 15 Delon Armitage, 14 Drew Mitchell, 13 Mathieu Bastareaud, 12 Maxime Mermoz, 11 David SMITH, 10 Jonny Wilkinson, 9 Sébastien Tillous-Borde, 8 Steffon Armitage, 7 Virgile Bruni, 6 Juan Smith, 5 Jocelino Suta, 4 Bakkies Botha, 3 Martin Castrogiovanni, 2 Jean-Charles Orioli, 1 Xavier Chiocci
Replacements: 16 Benjamin Noirot, 17 Florian Fresia, 18 Konstantin Mikautadze, 19 Pierrick Gunther, 20 Matt Giteau, 21 Rudi Wulf, 22 Michael Classens, 23 Carl Hayman
Grenoble: 15 Benjamin Thiéry, 14 Matthieu Nicolas, 13 Geoffroy Messina, 12 Nigel Hunt, 11 Alipate Ratini, 10 Fabien Gengenbacher, 9 Valentin Courrent, 8 Peter Kimlin, 7 Jonathan Best, 6 Cedric Beal, 5 Ben Hand, 4 Naude Beukes, 3 Richard Choirat, 2 Vincent Campo, 1 Kenan Mutapcic
Replacements: 16 Albertus Buckle, 17 Laurent Bouchet, 18 Hendrik Roodt, 19 Florian Faure, 20 Henry Vanderglas, 21 Nicolas Bezy, 22 Julien Caminati, 23 Dayna Edwards
Referee: Laurent Cardona
Assistant referees: Mourad Zitouni, Christophe Malterre
Television match official: Jean-Marie Piraveau