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Northern Ireland's hopes of qualifying for the 2023 World Cup took a severe blow with a 3-1 defeat by Austria in Wiener Neustadt.
Carina Wenninger, Nicole Billa and Barbara Dunst netted in a clinical 10-minute spell after half-time.
Joely Andrews scored a late consolation with her first international goal.
Defeat leaves Northern Ireland three points behind second-placed Austria, who are now favourites to secure the play-off position.
England are runaway leaders in Group D, aided by their 10-0 victory over North Macedonia, and with both teams still to face the Lionesses and two lower ranked teams in their final three games, Austria are now in pole position to secure second place.
After a 2-2 draw in Belfast in October and the sides level on points, the game had been described as a cup final pre-match. Despite the big billing, it was a low-key first half with few opportunities.
It was Northern Ireland who almost made a dream start when home goalkeeper Manuela Zinsberger missed Demi Vance's corner inside two minutes. Sensing the opportunity, NI's record goalscorer Rachel Furness raced in to the back post but the ball evaded her outstretched leg.
However, from there Austria began to dominate possession and press Northern Ireland deep in their own half. Dunst, who netted in the reverse fixture, curled an effort off target in a sighter for the Austrians before key forward Billa spurned two chances.
Billa, with 41 goals in 76 caps, lobbed over from a corner on 15 minutes and the prolific forward felt she should have done better when she fired over when Jackie Burns' punch landed at her feet on the edge of the area.
The heavens opened in Wiener Neustadt midway trough the half and both sides struggled to keep hold of the ball on the slick surface. Katharina Naschenweng saw a low effort easily gathered by Burns before Dunst again bent a wayward effort from range over the top.
Northern Ireland improved late in the half but struggled to create in the final third as referee Stephanie Frappart blew for halt-time right on the 45.
Poor start to second half costly
Northern Ireland's good defensive work from the first half was undone two minutes after the restart when Bayern Munich defender Wenninger flicked home Dunst's corner after evading marker Sarah McFadden.
Needing a goal to keep their World Cup dreams alive, Shiels' side nearly mustered an immediate response after Vance's free-kick was spilled by Zinsberger, however Simone Magill and McFadden failed to capitalise in the resulting goalmouth scramble.
Another Zinsberger mistake almost gifted Callaghan an equaliser when the Arsenal stopper spilled Abbie Magee's low cross and it fell to the path of the Northern Ireland captain, however a great recovery kept Austria ahead and Rebecca Holloway failed to capitalise on the follow-up.
But from there, two quickfire goals moved the game beyond the visitors. Burns misjudged Julie Nelson's pass 25 yards out and, making amends for her earlier misses, Billa slotted in to the unguarded net on 55 minutes.
Austria, showing a clinical touch that had deserted them in the first half, made it three when Dunst tucked home from close range after being played in by Laura Feiersinger to make the most of 10 minutes of uncharacteristic defensive errors by the visitors.
Northern Ireland regrouped well and
began to press forward, with Vance's cross clipping the top of the cross bar and Furness fired wide after finding space at the back post.
The pressure kept coming, and Zinsberger had to be alert to push captain's Wenninger's wayward header out for a corner, from which Andrews netted a deserved consolation with five minutes to play.
The ball was cleared to the substitute on the edge of the area and the 20-year-old's first-time effort rolled into the bottom corner after finding its way through a pile of bodies.
Naschenweng hit the post in the closing stages but, ultimately, Austria were well worth a crucial victory which puts one foot in the play-offs with three games to play with head-to-head decisive to teams level on points.
Austria can consolidate second place when they host Latvia on Tuesday, while Shiels' side will look to bounce back against England at a sell-out Windsor Park, with 16,000 set to be in attendance for the largest women's international to ever take place in Northern Ireland.
Northern Ireland and Austria have also been paired with host nation England at the Euro 2022 finals this summer, which will be a maiden tournament for NI's senior women.
Line-ups
Austria
Formation 4-1-4-1
- 1Zinsberger
- 12Wienroither
- 7Wenninger
- 2Georgieva
- 19Hanshaw
- 17Puntigam
- 3NaschenwengSubstituted forMakasat 90'minutes
- 9Zadrazil
- 10Feiersinger
- 8DunstSubstituted forKolbat 73'minutes
- 15BillaSubstituted forEnzingerat 61'minutes
Substitutes
- 4Degen
- 5Plattner
- 6Schiechtl
- 11Hillebrand
- 13Fuchs
- 14Höbinger
- 16Eder
- 18Kolb
- 20Makas
- 21Kresche
- 22Enzinger
- 23El Sherif
Northern Ireland
Formation 3-4-2-1
- 1Burns
- 5Nelson
- 4Robson
- 3Vance
- 22MageeSubstituted forWilsonat 90'minutes
- 7McCarronSubstituted forAndrewsat 80'minutes
- 10Furness
- 6HollowaySubstituted forMcGuinnessat 61'minutes
- 14WadeSubstituted forBellat 80'minutes
- 8Callaghan
- 9MagillSubstituted forMcGuinnessat 90'minutes
Substitutes
- 2McKenna
- 11McGuinness
- 12Flaherty
- 13Burrows
- 15Hamilton
- 16Caldwell
- 17Finnegan
- 18Bell
- 19Wilson
- 20Andrews
- 23McGuinness
Referee:Stéphanie Frappart
Live Text
Match ends, Austria Women 3, Northern Ireland Women 1.
Second Half ends, Austria Women 3, Northern Ireland Women 1.
Corner, Northern Ireland Women. Conceded by Laura Wienroither.
Substitution, Austria Women. Lisa Makas replaces Katharina Naschenweng.
Substitution, Northern Ireland Women. Kirsty McGuinness replaces Simone Magill.
Substitution, Northern Ireland Women. Emily Wilson replaces Abbie Magee.
Corner, Austria Women. Conceded by Jacqueline Burns.
Katharina Naschenweng (Austria Women) hits the left post with a left footed shot from the left side of the box. Assisted by Stefanie Enzinger.
Attempt missed. Laura Feiersinger (Austria Women) right footed shot from outside the box is close, but misses to the left. Assisted by Verena Hanshaw.
Goal! Austria Women 3, Northern Ireland Women 1. Joely Andrews (Northern Ireland Women) right footed shot from outside the box to the bottom left corner following a corner.
Corner, Northern Ireland Women. Conceded by Manuela Zinsberger.
Foul by Marissa Callaghan (Northern Ireland Women).
Sarah Zadrazil (Austria Women) wins a free kick in the defensive half.
Substitution, Northern Ireland Women. Megan Bell replaces Lauren Wade.
Substitution, Northern Ireland Women. Joely Andrews replaces Chloe McCarron.
Corner, Northern Ireland Women. Conceded by Verena Hanshaw.
Offside, Northern Ireland Women. Julie Nelson tries a through ball, but Marissa Callaghan is caught offside.
Attempt saved. Lisa Kolb (Austria Women) left footed shot from the left side of the box is saved in the bottom left corner. Assisted by Stefanie Enzinger.
Attempt missed. Rachel Furness (Northern Ireland Women) left footed shot from the centre of the box misses to the right. Assisted by Demi Vance following a set piece situation.
Foul by Laura Wienroither (Austria Women).