Marcello Lippi's side, beaten by Inter in Serie A a week ago and then by Galatasaray in the Champions League, are now four points behind leaders AC Milan who won 1-0 at Empoli thanks to a superb 30-metre strike from Brazilian substitute Kaka.
Unbeaten Milan now have 30 points with second-placed Roma, who face Chievo in Verona on Sunday, on 27.
Juventus, who were unbeaten in all competitions until a week ago, are in third place on 26 points.
Bernardo Corradi put Lazio ahead in the 21st minute with a beautifully angled, diving, near-post header from a Stefano Fiore cross.
Corradi turned Fiore's provider for the second goal on the stroke of halftime, racing on to a long ball from Paolo Negro and then finding Fiore with a neat pass inside which the midfielder confidently struck past Gianluigi Buffon.
It was a much-needed win for fifth-placed Lazio but another poor showing from Juventus who looked short of inspiration and created few chances.
Juve coach Lippi used all three of his substitutes at the break taking off Mauro Camoranesi, Paolo Montero and David Trezeguet, but the switch made little difference.
"To be frank I could have taken off any of seven or eight players," said Lippi.
"But when a team plays like that then the responsibility is ours -- mine and the technical team," he added.
"The truth is that we made errors at the back, in midfield and up front. We were not on top of the situation," said Lippi.
FEW CHANCES
In a game of few chances at Empoli, Milan went close to an opener in the 37th minute when Rui Costa found Serie A's top scorer Andriy Shevchenko but the Ukrainian's volley was saved at point-blank range by Empoli keeper Luca Bucci.
Empoli had a goal disallowed a minute later when Antonio Di Natale's low shot squeezed under Milan keeper Dida and over the line but Tomasso Rocchi was spotted in an offside position by the linesman.
Milan coach Carlo Ancelotti introduced Kaka for Andrea Pirlo in the 75th minute and six minutes later the Brazilian won the game with a spectacular long-range strike which flew past the motionless Bucci.
"It was a difficult game for us against a team who closed down well and showed they are in good form," said Ancelotti.
"It was hard work and it took an extraordinary goal to decide it".
