Luis Suarez scored a goal in each half to leave England all but out of the 2014 Fifa World Cup.
Uruguay's Liverpool striker broke the deadlock in a tight first half, guiding a deft header beyond England goalkeeper Joe Hart to put the South Americans ahead minutes before the break.
England's hopes were briefly raised ten minutes from time when Wayne Rooney broke his World Cup duck with his first goal in the final stages, tapping home after a good run from full-back Glen Johnson.
England's joy was short-lived, however, when a long punt from Uruguay keeper Fernando Muslera skimmed off Steven Gerrard's head only for Suarez to latch on to the loose ball and bury a shot beyond Hart.
England now rely on Italy winning both of their remaining games in the group, which would then give them a chance of qualifying on goal difference -- if they beat Costa Rica next week.