Inter's nemesis Diego Falcinelli scored in a 1-0 win for Sassuolo as the Nerazurri lost for the second match in succession, handing the initiative to title rivals Napoli and Juventus.
Falcinelli had struck just three times in 21 Serie A appearances since netting a brace for Crotone against Inter in April, but he crashed home a brave header at the expense of his favourite opponents in the first half at Mapei Stadium on Saturday.
Mauro Icardi saw a penalty saved after the break as Inter, whose 3-1 loss to Udinese last time out was their first defeat of the league season, battled in vain to force an equaliser.
A second consecutive loss for Luciano Spalletti's team leaves them third in the table, five points behind Maurizio Sarri's leaders Napoli, who saw off Sampdoria 3-2 at home.
Reigning champions Juventus are second and can move four points clear of Inter if they beat Roma in Turin later on Saturday.
Ultimately, it was a frustrating final outing before Christmas for Spalletti's side, who are in Coppa Italia action against local rivals AC Milan on Wednesday, before hosting Lazio in Serie A next weekend.
Game over!!!!! Terza vittoria consecutiva per il Sassuolo che al supera 1-0 l’Inter!!!!! Decisiva la rete di Diego Falcinelli nel primo tempo e la parata di Consigli sul rigore di Icardi! 1-0December 23, 2017
Inter started strongly and were the first team to register a shot on target, Antonio Candreva firing straight at Sassuolo goalkeeper Andrea Consigli in the seventh minute.
A minute later, Milan Skriniar also went close, climbing highest to meet Candreva's corner, only to head the ball over the bar.
Mauro Icardi somehow shot wide from close range with only the goalkeeper to beat in the 25th minute, but the raised flag of the assistant referee spared the Argentine's blushes.
Inter's failure to capitalise on their dominance was punished nine minutes later, when Matteo Politano charged up the right flank and dinked an inviting cross to the back post.
Falcinelli bravely threw himself at the ball, heading it past Samir Handanovic to give Sassuolo a 1-0 lead. The goalscorer also collided with the post as he landed, but was able to continue after receiving treatment from medical staff.
3 - Diego Falcinelli has scored 3 goals in his last 2 Serie A games against Inter. Killer. December 23, 2017
Icardi spurned a chance to equalise as half-time approached, chipping the ball over the onrushing Consigli but seeing covering defender Francesco Acerbi head behind before he could get a shot away.
Inter made a blistering start to the second half and should have been level in the 49th minute, Icardi seeing his penalty saved by Consigli after Acerbi blocked Joao Cancelo's cross with his arm.
13 - Andrea saved 13 penalties in Serie A: only Handanovic (21) saved more penalties than the Sassuolo's goalkeeper since 2008/09. Cat. December 23, 2017
Sassuolo had a penalty appeal of their own waved away when Domenico Berardi went down under pressure from Cancelo, and the hosts' coach Giuseppe Iachini was duly sent to the stands by referee Daniele Doveri.
That hectic spell gave way to a pattern of more patient, probing play from Inter, Edoardo Goldaniga clearing Ivan Perisic's threatening header in the 73rd minute.
Matteo Politano nearly sealed it for Sassuolo in the 81st minute, cutting inside from the right flank and drawing a good save from Handanovic, who also kept out a speculative long-range attempt from Alfred Duncan.
At the other end, substitute Eder lashed a half-volley narrowly wide of the far post with five minutes to go in what proved to be Inter's last real chance to salvage a point.
