Fire forward Marco Pappa and defender Austin Berry each collected second half goals to lead the hosts to a 2-1 come-from-behind victory at Toyota Park.
"I genuinely thought we were going to win the game tonight," Toronto interim coach Paul Mariner said. "I thought we were looking pretty confident and we kept them in front of us. (But) you can't give decent teams opportunities like we give them ... I think it's plain to see that we gifted them two goals and you can't do that."
Toronto (5-13-4, 19 points) suffered its second straight loss but is still 4-4 with four ties since Mariner took over June 7. Chicago (10-7-5, 35 points) topped last year's nine-win total and still has 12 games to play.
Forward Ryan Johnson intercepted a pass, faced Chicago goalkeeper Sean Johnson in a one-on-one and hit the back of the net with a 15-foot shot to open a 1-0 lead in the 16th minute.
The Chicago keeper also turned in a critical save when he prevented Toronto from making it 2-0 in first half stoppage time, turning away Luis Silva's short shot just before halftime.
The visitors had a scare in the eighth minute when Chicago forward Chris Rolfe knocked over goalie Milos Kocic on a breakaway. Kocic deflected Rolfe's shot but was on the ground for several minutes before returning to action.
"Milos [Kocic] probably broke his nose but said he was fine," Mariner said. "He’s a tough kid."
Mariner was also happy with the play of Ryan Johnson and fellow forward Eric Hassli, the Designated Player acquired last month from Vancouver.
"Everybody's disappointed in the locker room," said Hassli, who had 12 goals in 44 matches while with Vancouver. "I think we did great in the first half then just gave up set pieces.
"I hate to lose the game and we're looking forward to the next game with Columbus. We need to win."
Pappa erased the 1-0 Toronto lead in the 64th minute on a short liner from the left of Kocic. Berry, a rookie defender, struck 20 minutes later with a header after a Pavel Pardo free kick in front of 15,757 fans at Toyota Park.
Toronto played the final 11 minutes with 10 men after defender Logan Emory was issued a second yellow card for the game and was ejected.
"I thought we had a great second half," Fire coach Frank Klopas said. "The guys pushed. There was a belief in the team and we created chances and we scored two very nice goals."
Kosic closed with five saves while Chicago's Johnson had two.
Chicago beat Toronto 3-2 at BMO Field on April 21. The Fire travel to Toronto Sept. 12 for the series finale.
Toronto travels to Columbus next Saturday and then hosts Portland on Aug. 15.