Striker Jerry Bengtson dumped Spain out of the Games as Honduras pulled off a major shock at St James' Park, winning 1-0.
The 25-year-old's seventh-minute header, his third goal in two games, ensured that the Spaniards, whose senior team are reigning world and European champions, will go home early following an opening defeat by Group D leaders Japan.
Scott Sinclair and Daniel Sturridge gave watching England manager Roy Hodgson a nudge as Great Britain's first Olympic win since 1960 - a 3-1 success against UAE - sent them top of Group A.
After Rashed Eisa had cancelled out Ryan Giggs' opener, Sinclair scored with his first touch. Sturridge then produced a superb chip 14 minutes from time to clinch victory.
The result got Britain back on track to secure a quarter-final berth, although they will almost certainly need to avoid defeat against Uruguay at the Millennium Stadium on Wednesday to seal their knockout berth.
Ten-man Senegal blew Group A wide open with a shock 2-0 win over highly-fancied Uruguay at Wembley.
Impressive teenager Moussa Konate scored twice, either side of Abdoulaye Ba's first-half dismissal.
Kim Bo-kyung was Republic of Korea's hero with a second-half winner as they beat Switzerland 2-1 in their Group B encounter.
Arsenal's Park Chu-young had opened the scoring for Korea but Switzerland replied instantly through Innocent Emeghara, only for Kim to settle the issue.
Tottenham playmaker Giovani dos Santos was Mexico's hero with both goals in their Group B clash with Gabon.
Meanwhile, striker Kensuke Nagai fired Japan to the brink of the quarter-finals with a late winner against Morocco.
The Grampus Eight frontman struck with an instinctive lob six minutes from time to settle a tight Group D encounter.
Egypt's hopes of qualifying for the quarter-finals suffered a blow as they were held to a draw by a battling New Zealand side.
Egypt fell behind to a 16th-minute strike from Chris Wood, but Mohamed Salah equalised from close-range at the end of the first half.
Elsewhere in Group C, Neymar underlined his status as a hot prospect in world football by scoring a breathtaking free-kick to help defeat a spirited Belarus 3-1 at Old Trafford in Manchester.
Neymar's dazzling skills were on show for 66,212 spectators, with the crowning glory coming in the 65th minute when the 20-year-old bent a peach of a set-piece over the wall and past the sprawling Aleksandr Gutor.
Brazil have now qualified for the last eight with one match to spare, but they were given a stern test by Belarus, who opened the scoring through Renan Bardini Bressan.
Neymar crossed for Alexandre Pato to equalise and also set up Oscar for Brazil's third after his brilliant effort had put them ahead.