Ajax win 3-1 at home to send the English Champions to the bottom of Group D.
Manchester City's chance slips away in Amsterdam
Ajax 3 Manchester City 1
Between them, Real Madrid, Borussia Dortmund and Ajax have been European champions 14 times.
Manchester City have never enjoyed that status.
And now, at least for another year, it seems they won't. The old order are reasserting their authority.
The "Group of Death" appears likely to claim its first victim: the English champions.
Three games have brought a solitary point and a match Roberto Mancini had branded a must-win was lost.
To make matters worse City had, and spurned a lead to the side widely regarded as the outsiders in the pool.
Ajax have an illustrious history but they lack the financial muscle of clubs in bigger countries.
Yet Siem de Jong, Niklas Moisander and Christian Eriksen secured a stylish upset.
For a young, unfancied team, it was a glorious triumph.
For a City side with aspirations of conquering the continent, it was an awful night.
It leaves them on the brink: even victories in each of their three remaining games may not be enough.
A vast improvement in performance is necessary, too: Joe Hart had bailed them out with a string of saves against Dortmund, but a theme of City's campaign has been that opponents have been afforded too many shots at goal.
Yet City actually scored first and with their opening attempt.
Micah Richards led a counter-attack, picking out the advancing James Milner, who laid the ball into the path of Samir Nasri.
He swept his shot across keeper Kenneth Vermeer and into the far corner of the net.
Had Richards then taken an opportunity to make it 2-0, it could have been a very different game.
Instead Ajax responded. They had been the more impressive side in the opening 20 minutes and they levelled on the stroke of half time.
The Eredivisie winners posed problems on City's left from the start and the equaliser came from a combination of two of their most dangerous players; De Jong, whose sharpness was ever apparent, reacted to right-back Ricardo van Rhijn's cross with an emphatic finish, struck so crisply that Hart barely moved.
If that was frustrating for City, Ajax's second goal was more damning.
A sizeable side were undone at a set piece. Eriksen delivered the right-wing corner and Moisander rose unopposed to head in.
Mancini's response involved a reshuffle as he went to three at the back. Gael Clichy moved infield but, while City tried to acclimatise to the new system, they conceded again. The unfortunate Clichy deflected in Eriksen's shot.
It was, nevertheless, a reward for an unexpected switch from Frank de Boer.
The Ajax manager had deployed Eriksen, normally a midfield playmaker, as an ersatz striker. His willingness to shoot from distance had been evident earlier. Now it resulted in a goal. Then City responded. As Mancini overloaded with attackers, introducing first Carlos Tevez and then Mario Balotelli to join Sergio Aguero and Edin Dzeko in a four-pronged attack, they could have drawn level.
Twice Dzeko went clear on goal; twice he was denied by Vermeer. Nasri, too, had a chance but skewed wide while the Frenchman felt he was being fouled by Moisander.
City have sprung comebacks before, whether to win last season's title or Saturday's game at West Bromwich Albion, but there was not another.
And so, before October is over, City's Champions League campaign seems to be nearing its end.
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