Jarell Quansah’s goal to make it 3-3 in the seventh minute of added time was ruled out after Alexis Mac Allister was judged to have handled the ball.
Quansah slammed in from close range to spark wild Liverpool celebrations and furious protestations from Toulouse before Bulgarian referee Georgi Kabakov was called to the VAR screen – having already appeared to point to the centre circle.
The ball had bounced off Mac Allister’s chest into his upper arm much earlier in the move, which was ruled enough to disallow the goal.
Toulouse impressed for much of the match and went 2-0 up though strikes from Aron Donnum and Thijs Dallinga.
Liverpool pulled one back through a bizarre own goal from Cristian Casseres Jr, but Frank Magri restored the French side’s two-goal advantage.
Substitute Diogo Jota then scored for Liverpool with two minutes of normal time left and they thought they had earned a point with virtually the final kick of the match, before VAR’s intervention.
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Lacklustre Liverpool in surprise loss
This match becomes the latest to feature VAR-related controversy in a turbulent week, although while Liverpool were denied a point, they had been well below their best.
Toulouse are 14th in Ligue 1 – just one point above the relegation play-off places – and had lost 5-1 at Anfield in the reverse fixture earlier in this group.
But after withstanding heavy pressure they took the lead on 36 minutes through a mistake by Kostas Tsimikas. The Greek left-back was robbed by Donnum, who strode forward into the area and found the back of the net with a shot that deflected off Quansah.
Toulouse top scorer Dallinga bagged the second just before the hour, slamming into the bottom corner following a fine team move.
The hosts were rocked when a defensive mix-up saw a high cross bounce off Casseres’ back and into his own goal, after he turned his back on the ball expecting a team-mate to head it away.
But they hit back immediately, Magri slamming in from close range after Caoimhin Kelleher palmed out a low cross.
Jota’s powerful low strike set up a grandstand finish, but Toulouse held on for a famous win – with help from the officials.
Having won their three previous Europa League games, Liverpool are still well placed to qualify from Group E and need just one more victory from their final two pool matches to at least reach February’s play-off round.
Salah and co unable to save Reds
For his 450th game in charge of Liverpool, Jurgen Klopp made nine changes to his starting XI from the Premier League draw at Luton.
Despite this, he was able to name a stacked bench including Dominik Szoboszlai, Mohamed Salah and Trent Alexander-Arnold – all of who were thrust on following an opening 45 minutes which started well but petered out.
After only four minutes Joe Gomez – captaining Liverpool with Virgil van Dijk unwell – hit the bar with a flicked header.
Half an hour in, teenage winger Ben Doak fired a shot straight at Guillaume Restes after the Toulouse keeper fumbled a cross.
But after failing to take their chances, Liverpool were made to pay for Tsimikas’ loss of concentration from which they never fully recovered – even after calling for the cavalry.
Impressive Toulouse earn famous win
Among the nine players to come into the Liverpool XI was Luis Diaz. After a difficult 12 days following the kidnap of his parents in Colombia, he started this game knowing his father was safe having “wanted” to play, according to Klopp.
Having scored a dramatic late equaliser against Luton, Diaz was full of effort once again in France. On 26 minutes, he hammered a low shot which Restes gathered at the second attempt.
But it summed up Liverpool’s first half showing – dominant, but lacking end product.
This gave Toulouse a much-needed confidence boost. They had not won in five matches, and had been beaten by Liverpool in three previous meetings.
But fired up by a fervent home crowd, they rode out the Liverpool storm, grabbed their opportunity and were subsequently the better team.
Despite Liverpool bringing on the big guns, Dallinga found the net three times after the interval. His first was ruled out after he fouled Joel Matip and the third was offside, but his second was just right.
Following Dallinga’s disallowed goals, Liverpool suffered the same fate – albeit in much more dramatic circumstances.