England manager Roy Hodgson said he was "devastated" after Luis Suarez's late strike gave Uruguay a 2-1 victory in Group D.
The Liverpool striker marked his return to action by heading home the first goal of the game, but England appeared on course for their first point of the tournament when Wayne Rooney grabbed an equaliser on 75 minutes.
However, Suarez latched on to a poor clearance from club-mate Steven Gerrard to give Uruguay a win that leaves England's hopes of progress hanging by a thread.
Hodgson told ITV: "We're more than disappointed -- we're devastated. We believed we could do enough today to get a result from this game and having worked so hard to counter that Suarez goal in the first half and get back to 1-1, I fully believed we would win the game or at least draw it.
"To concede the second goal as we did is an unbelievable blow and I don't quite know what to say at this time. It's a goal that we don't expect to concede. Long goal kicks with the kind of players we have in the team, we deal with them.
"I thought we dealt with the Uruguay attack well for long periods of the game, but we came up against a very strong defensive unit. We still did enough to get the draw we needed, but we didn't get it.
"We were in control for such a long period of time. We started the second half badly, but after five or six minutes we got ourselves back on track. They had been nowhere near our goal, but all that matters is how many times you put the ball into the opposition's net.
"We played against a strong side defensively and maybe they restricted spaces a bit better. Everyone tried very hard and the mood is very low."
Apart from the two goals, Hodgson feels England contained Suarez adequately, while he was left to rue the way the striker scored his second.
"I thought we controlled Suarez well, we kept him very quiet. The second goal was an unfortunate flick to put him through," he said.
"He was voted player of the year by many people. Today he came back from injury but two chances came his way and he took both of them.
"We always heard that he would be fit for some part of the World Cup. What the Uruguayans wanted from him today they got."
England have not yet been eliminated from the competition and if results go their way, they still have an outside chance of reaching the knockout stages.
Hodgson, however, was struggling to look too far ahead, but did have some kind words for his team, despite their two defeats.
"Where does it leave us? I don't quite know what you want me to say," Hodgson said. "I think in both games we played good football. We showed that we are a team that is making progress, but results prove everything.
"We know from history that when the World Cup is played on a South American continent, it's going to be a South American team that wins. I wouldn't disagree that South American teams have started well."
Some question marks may now be asked about Hodgson's future as England manager, but the 66-year-old does have a contract that will take him through to the Euro 2016 finals in France.
Asked about his position, he said: "I'm bitterly disappointed, of course, but I don't feel I need to resign, no. On the other hand, and if the FA think I'm not the right man to do the job, that will be their decision, and not mine."