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Rafael Benitez failed to win his first trophy as Chelsea manager as his team lost against Brazilian side Corinthians in the Club World Cup final in Japan.
Paolo Guerrero scored the only goal on 69 minutes when he reacted quickest to head home past three Blues players.
Fernando Torres had a chance to force extra time but fired straight at Cassio with only the goalkeeper to beat.
Chelsea's Gary Cahill, who also missed a good opportunity, was sent off after clashing with Emerson late in the game.
Torres had the ball in the net in injury time when he headed in but his effort was ruled out for offside as Corinthians held on to win the trophy.
The Blues become the first team since 2006 to fail to win the Club World Cup after winning the Champions League.
Chelsea should have taken an early lead when a Juan Mata corner fell to Cahill and his header was blocked by Chicao, but the ball rebounded to the centre-half, whose shot was saved on the line.
Corinthians, backed by 30,000 fans who had travelled to Yokohama, then had a good chance when Mata gifted the ball to Emerson.
The Brazilian side had two attackers against two defenders but David Luiz, who returned to the back four after impressing in midfield in the 3-1 semi-final win against Mexican side Monterrey, showed his defensive qualities by ushering the midfielder out of play.
The South American side, who won the Copa Libertadores in July, created their best chance of the first half when Guerrero shot across goal and the ball reached Emerson, whose shot from a narrow angle hit the outside of the post.
But, with Corinthians defending high up the pitch, Chelsea began to create more chances.
Luiz, a boyhood Corinthians fan, wasted a free-kick in a good position after Eden Hazard had been fouled by Chicao.
A wonderful piece of creativity from Hazard, who chipped a perfect pass to cut out left-back Fabio Santos, gave Victor Moses a chance but the winger's heavy first touch enabled central defender Paulo Andre to clear.
Frank Lampard, who was making his first Chelsea start since suffering a calf injury in a Champions League game against Shakhtar Donetsk on 23 October, played another intelligent pass, which Torres controlled on his knee before having his shot saved by Cassio.
The Corinthians goalkeeper then tipped wide a curling effort from Moses and also denied Mata as Chelsea pushed to become only the second English team to win the competition after Manchester United's success in 2008.
But Corinthians went ahead midway through the second half when Paulinho, who has been linked with a move to Arsenal, Manchester United and Manchester City, collected a pass and ran into the penalty area.
The chance appeared to have gone as he lost control but the ball fell to Danilo who cut inside and his shot looped up off Gary Cahill and, despite Chelsea having three defenders on the line, Guerrero reacted quickest to nod home from five yards.
Chelsea, who were eliminated from the Champions League earlier this month, brought on Oscar and Cesar Azpilicueta for Moses and Branislav Ivanovic as the Blues pushed for an equaliser.
Torres had a glorious chance to equalise when he only had Cassio to beat but could not take the opportunity.
The Blues ended the game with 10 men after Cahill clashed with Emerson, although the English side thought they had forced extra time when Torres headed in but the goal was ruled out for offside.
Chelsea had one final shot, Mata hitting the base of the post but Corinthians, who won the trophy in 2000, became the first South American team to win the competition twice.
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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.
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