Blues took an early lead on the banks of the River Thames but it was Damien Duff and Bobby Zamora stunners that sailed into the net that landed Fulham the points in the cruellest of fashions.
A game some had predicted may fail to ignite was in fact fairly high octane with both sides giving it their all to win right until the very death - and in the end the visitors lost a game they didn't deserve to due to Zamora's last minute free-kick.
Chris Baird's third minute own goal and Duff's strike on the hour mark meant it looked like it was going to be honours even in a game where Blues had proved extremely stern opposition for their London hosts.
It was the home crowd celebrating at the final whistle but almost 1,500 Blues fans stood and applauded their team off after witnessing another excellent performance.
Alex McLeish brought in Keith Fahey for the trip to Craven Cottage - and pushed James McFadden into a forward role alongside Cameron Jerome.
Fahey replaced Ecuadorian striker Chucho, who dropped down to the bench in what was McLeish's 50th Premier League game as manager.
Blues started brightly and with just 90 seconds played McFadden latched onto a loose Nicky Shorey pass, moved forward and shot straight at Mark Schwarzer from a central position 30 yards out.
But less than a minute later things got even better as McLeish's men took an early lead. Once again McFadden drove at the Fulham defence and with Shorey backing off the ball broke for Lee Bowyer on the right side of the area. The midfielder swung over a lovely cross that was destined for the head of Jerome but before the striker could pounce defender Baird did his job for him and somehow contrived to head the ball past a stranded Schwarzer and into the top corner of his own net.
Villa loanee Shorey skewed a shot well wide following a Damien Duff free-kick to the edge of the box and then, at the opposite end of the pitch, Fahey darted into an excellent position to pick up Jerome's low cross but his well hit shot from 12 yards was blocked.
England hopeful Joe Hart produced a point blank save to deny Simon Davies, who had crept in behind the Blues backline, on 10 as a game which many had predicted would be very tight began as an open, end-to-end affair.
McFadden and Jerome combined well on 13 with the latter firing wide as Blues produced yet more neat interplay and the home support became increasingly frustrated.
On 24 Roger Johnson's timing and placement was spot on to hook the ball away from an advancing Zoltan Gera after Bobby Zamora had flicked the ball into his path - once again demonstrating the excellent defending that has underpinned Blues' season so far.
Two minutes later Duff tried his luck from range but his left-footed drive sailed over Hart's crossbar and on 32 Davies headed a cross from the right straight into the goalie's arms.
Blues pressed again and Larsson exchanged a one-two with Jerome down the right, the Swede then cutting inside onto his left foot before unleashing a shot from 18 yards straight into the midriff of Brede Hangeland.
Zamora stretched every sinew to try and get on the end of Gera's cross with eight minutes to go to the break and did get a foot on the ball at the back post but could only steer it several yards wide of target.
Chances were limited in the first few minutes of the second half but Blues crafted an opportunity on 52 when Larsson wriggled clear of not one but two chasing Fulham players and rolled a neat pass to Fahey who, from some 25 yards out, dragged a low shot wide.
Hart was then alert to pluck a 20-yard Zamora half-volley out of the air but the Fulham foray didn't affect Blues' desire to try and grab a second goal and Jerome hit the target and forced Schwarzer into a low save from McFadden's assist.
On 57 the home crowd were incensed when referee Phil Dowd turned down their penalty appeals after Gera's chipped pass struck Scott Dann. The official was well placed and wasted no time in waving play on.
But on the hour mark the Fulham faithful did have something to cheer about. Duff picked the ball up out on the right and exchanged passes with Gera. What happened next was a cruel blow to Blues as Duff cut along the face of the area and arrowed an unstoppable left-footed drive past Hart's outstretched right arm, the ball whistling into the back of the net off the post.
The goalscorer then became the first player to go into the referee's notebook for a foul on Fahey as a game that had been of a high tempo throughout cranked up another notch.
McFadden's hooked volley was clung onto well by Schwarzer and then, on 68, came the first substitution of the game when Craig Gardner replaced Larsson.
A couple of minutes later McFadden nearly set Craven Cottage alight when his superbly struck piledriver from 25 yards thumped down off the underside of the bar but unfortunately didn't cross the line. Had it done so it would certainly have been a goal of the month contender, if not the season.
By now Blues were piling on the pressure again and the home crowd held their breath on 77 when sharp shooter Kevin Phillips made his way off the bench and onto the pitch in place of Jerome.
With Ridgewell marauding down the left and looking to be involved in attacks at every possibility the visitors were continuing to ask questions whilst the backline had to remain well aware of the counter attack.
There was only a minute left when Carr ran into Gera on the edge of the area and Fulham were awarded a free-kick and how costly it was to prove - Zamora stepping up and unleashing a fierce curler that flew into the top corner.
Full time: Fulham 2 Blues 1
Fulham: Mark Schwarzer, Chris Baird, Aaron Hughes, Brede Hangeland, Nicky Shorey, Simon Davies (Bjorn Helge Riise 83), Danny Murphy (C), Dickson Etuhu, Damien Duff, Zoltan Gera, Bobby Zamora.
Unused subs: Pascal Zuberbuhler, Stephen Kelly, Stefano Okaka, Chris Smalling, Jonathan Greening, David Elm.
Blues: Joe Hart, Stephen Carr (C), Roger Johnson, Scott Dann, Liam Ridgewell, Seb Larsson (Craig Gardner 68), Barry Ferguson (Michel 90), Lee Bowyer, Keith Fahey, James McFadden, Cameron Jerome (Kevin Phillips 77).
Unused subs: Maik Taylor, Stuart Parnaby, Chucho, Gregory Vignal.
Referee: Phil Dowd
Bookings: Duff (63), Mcfadden (66)
Goals: Baird OG (3), Duff (60), Zamora (90)
Attendance: 21,758
