Jarell Quansah had seemingly snatched a point for the Reds with the final kick of the game, but his 97th-minute finish was ruled out after a VAR review. It was deemed that Alexis Mac Allister had handled the ball in the build-up, even though that came well before Quansah eventually turned the ball into the net.
Just a fortnight ago, the Reds had swatted aside the Ligue 1 outfit at Anfield, winning 5-1 to make it three wins from three in Europe and already leave themselves on the bring of qualifying for the knockout stages.
Victory in France would have been enough to do so, and as it turned out secure top spot in Group E with two matches to spare, but Jurgen Klopp's side could not do so as they were punished for a largely lethargic performance. Diogo Jota set up a grandstand finish, as he halved the deficit heading into seven minutes of stoppage time, but Quansah could not quite complete the rescue act.
Luis Diaz was named in a rotated Liverpool side, hours after it was confirmed that his father had been released almost two weeks after he was kidnapped in Colombia.
The winger was bright in the early stages but watched on as Kostas Tsimikas generously helped Toulouse open the scoring. The Liverpool left-back took far too long on the ball, lost possession and allowed Aron Donnum to drive into the box, where his finish beat Caoimhin Kelleher via a large deflection.
The Reds did not particularly look like finding an equaliser, so it was no surprise when Klopp turned to the cavalry at half-time. Mohamed Salah, Trent Alexander-Arnold and Dominik Szoboszlai were all introduced, though it did not have the desired impact.
Thijs Dallinga, who scored at Anfield, had the ball in the net, only for it to be ruled out for a foul on Joel Matip, but his celebrations were not put on hold for long. His goal came just before the hour mark, as he took one touch to bring the ball down and another to find the bottom corner, with the help of the inside of the post.
Liverpool threatened a late comeback when they halved the deficit in bizarre circumstances, as Cristian Casseres turned his back on the ball at the back post and, off his shoulder, diverted Joe Gomez's header into his own net.
Within two minutes, Liverpool were two down again. A low ball into the middle was pushed straight out by Kelleher and there was nobody in a red shirt there to help him, as Frank Magri arrived on the scene to fire home into the vacant net.
Jota drove into the box and finished well with his left-foot to offer hope of late drama, and Quansah then stretched to turn the ball into the net deep into stoppage-time after a Darwin Nunez miskick. The referee first pointed to the centre circle to award the goal, then pivoted and consulted the pitchside monitor, returning to chalk off the goal as Liverpool were beaten for just the second time this season.