Fergal Doherty missed a chance to snatch a Division One draw away to Cork in Sunday's match at Pairc Ui Rinn.
The Ulster county showed showed fantastic character to fight back after Cork had opened by scoring a goal and five points without reply.
Two quick fire goals by Enda Lynn and Emmet McGuckin revived the Oak Leaf side's fortunes before half-time.
Lynn scored another goal and Derry were within a point when the last kick of the game by Doherty drifted wide.
It was a heartbreaking way for Brian McIver's men to lose their unbeaten record but it means four league wins out of four for Cork under Brian Cuthbert.
Derry had been guilty of a sluggish start, allowing Cork to storm into a substantial eight-point lead inside 12 minutes, with John O'Rourke fisting in their goal after a John Hayes pass.
Mark Craig, Sean Leo McGoldrick and Mark Lynch got Derry moving on the scoreboard but the hosts struck a second goal through corner-back Tom Clancy's fine finish.
That left Cork fans anticipating a huge half-time advantage but those two goals from Lynn and McGuckin gave the Oak Leafers renewed hope.
Lynn saw his first effort blocked by keeper Ken O'Halloran but the ball went off the Derry man and into the net.
Then, when James Kielt played the ball in, it fell favourably for McGuckin to score the visitors' second goal and leave Derry just 2-4 to 2-9 in arrears at the interval.
Derry kept up the momentum after the break and Lynn's second goal, along with points by Lynch and Doherty and a Benny Heron free, saw them cut the deficit to a single point.
Two late Colm O'Neill frees proved crucial and Derry's scores by Lynch and full-back Chrissy McKaigue were not quite enough.
Allianz Football League results
Saturday 8 March
Dublin 1-22 1-12 Kildare
Armagh 2-18 1-12 Laois
Sunday 9 March
Cork 2-18 3-14 Derry
Kerry 3-15 0-9 Tyrone
Westmeath 3-9 2-17 Mayo
Donegal 1-12 1-12 Meath
Galway 1-12 0-8 Down
Monaghan 2-14 0-12 Louth
Cavan 1-12 0-10 Sligo
Fermanagh 4-10 3-17 Roscommon
Limerick 1-14 1-13 Wexford
Offaly 1-10 1-15 Longford
Carlow 3-15 2-17 Antrim
Tipperary 3-9 0-14 Clare
Waterford 0-9 2-10 London
Wicklow 0-11 1-17 Leitrim