Abject Wales produced by far their worst performance in John Toshack's first year as manager.
Toshack was hardly able to celebrate 12 months in charge as his side looked ordinary and almost disinterested in this friendly.
The winner came from the spot just before half-time when Chrysis Michael fired home a penalty after Danny Collins tripped Konstantinos Makridis.
From then on Wales barely managed a whimper of opposition and only managed one decent chance through substitute Robert Earnshaw in the final minutes.
Had it not been for an outstanding display from goalkeeper Lewis Price on his debut, this could have been a very embarrassing scoreline to match a dreadful performance.
Danny Gabbidon captained Wales for the first time in the absence of Ryan Giggs and after Mark Delaney dropped out at the last minute with a stomach upset.
Toshack made four changes from the side which beat Azerbaijan last month. Giggs, James Collins and Simon Davies were all injured while veteran goalkeeper Paul Jones stepped down to allow 21-year-old Price to make his full international debut.
Craig Bellamy returned to the team for the first time since he played against Austria in Vienna last March, while Sam Ricketts and Robert Page also returned in front of a poor crowd in the Tsirion Stadium.
Israeli referee Heim Jacov, who had been brought in at late notice after requests from the Welsh for a neutral official, stamped his authority on the game immediately with some fussy decisions.
Ipswich keeper Price was soon in action with a fine far-post block to keep out of a close-range volley from Constantinos Charalambidis.
Three minutes later Ioannis Okkas, who plays for Greek giants Olympiacos, raced away after a Carl Robinson error to blaze over from 15 yards.
Bellamy's pace was beginning to worry the Cypriots and twice the Blackburn striker raced away only to see his crosses wasted.
Price again came to Wales' rescue when he beat away a fierce shot from Lambros Lambrou in a packed area.
He was coping well until he spilled a fierce 30-yard shot from Okkas, and when Charalambidis forced the ball goalwards it was Bellamy who cleared off the line.
Carl Fletcher was booked on 34 minutes for a foul on Makridis with Wales' midfield looking ragged.
The hosts' pace was bothering Wales all over the pitch and it cost them a penalty two minutes from the break from which Cyprus took a deserved lead.
Danny Collins stuck out a foot as Makridis surged past him and the midfielder crashed to the ground. Referee Jacov had no option but to point to the spot, and Michael drove home the spot-kick.
Toshack took off Danny Collins at the break and sent on Gavin Williams to play wide on the right.
Bellamy scampered away on 46 minutes but with Hartson having got himself free of his marker the poor cross was clutched by Michael Morphis.
Two minutes later, David Vaughan fired over a cross from the left and got his head to the ball but could not direct it goalwards. Then Asimakis Krassas set up Yiasemakis Yiasoumi for a 15-yard shot which flashed just wide.
After 67 minutes, Wales sent on Earnshaw in place of Vaughan, with Wales playing with three strikers in an attempt to get back into the game.
Price again saved Wales when he blocked a close-range effort from Okkas as Cyprus threatened to extend their lead.
Wolves defender Rob Edwards took over from Richard Duffy on 77 minutes, but it needed Price again to turn over Charalambidis' volley before Gareth Roberts came on for Ricketts a minute later.
Wales' first real effort came after 85 minutes when Williams and Earnshaw combined well on the left before the West Brom striker cut inside to drive a low shot just wide of the far post.