Town's 17-match home unbeaten run stretching back to April ended as West Ham went away from Portman Road with a 2-0 win. Keeper Kelvin Davis gifted the first in the opening minute, the second goal coming from Matthew Etherington in the final minute of normal time.
The Blues lined-up as they did against Stoke City, with midfielder Kevin Horlock again the man left out. Lewis Price returned to the bench having had his loan at Cambridge United ended early.
No sooner had the game started and West Ham went in front courtesy of an awful howler from Kelvin Davis. Matt Richards shielded the ball from Marlon Harewood and played it back towards the edge of area, Richard Naylor leaving the ball for Kelvin Davis to clear.
The youngster's ball back was under-hit, although there seemed to be little problem until Davis chose to take a touch before clearing, allowing Marlon Harewood to get to the ball and play it into an empty net. It was a dreadful goal to concede, there appearing little reason why the keeper hadn't hit it first time.
Town had a couple of early chances through Ian Westlake, the midfielder heading a Magilton ball to the keeper and then having a shot from a Currie corner blocked, but nothing clear-cut.
The Hammers had the ball in the net for the second time in the 17th minute when Nigel Reo-Coker headed Etherington's freekick beyond Davis, however, the linesman's flag had been raised.
Davis continued to have a tricky afternoon and dropped a Gavin Williams shot. Fortunately, Tommy Miller was on hand to clear.
Town had failed to get going after the shock of the early goal and the game had quickly become a scrappy midfield affair, the Blues' only chances a Miller shot wide and a Currie 25-yarder which was easy for the keeper.
The game's first piece of actual football gave Darren Currie a chance on the left. The midfielder's strike hit a defender after a passing move across the field involving Magilton, Miller, Richards and others.
Just before the break, Currie sent in a dangerous freekick towards the near post which was cleared before Magilton struck Kuqi's lay-back powerfully but well wide.
It had been a disappointing half, both from the perspective of the scoreline and the quality of the football. Neither side had played particularly well, with Town never really recovering from the goal and showing a tendency to lose possession or make daft passes in dangerous positions on the edge of the box.
West Ham were playing their now usual fast-breaking game and Harewood and Zamora were causing a few problems. The Town strikers hadn't really created similar hassles for the Hammers' backline, despite a few Darren Currie crosses flying into the box.
Richard Naylor, once again probably Town's best player, made an important interception just after the break as Zamora sent a low ball across the box.
Town felt they should have had a penalty in the 51st minute when Williams bundled Westlake over on the edge of the box. Referee Paul Taylor, who made strange and often needless decisions throughout, saw no foul, although from the North Stand it looked a clear-cut spot-kick.
A minute later, Currie played the ball in to Kuqi in a good position to the left of goal but his first touch let him down and keeper Stephen Bywater collected. Soon after Bobby Zamora picked up a yellow card for a foul on Fabian Wilnis.
Shefki Kuqi joined him in the book just after the hour for reacting angrily to what he felt was as a dive from Carl Fletcher. The Finn was even more incensed by something Fletcher said to him and took some claming down. Fletcher escaped with a word from the referee.
Town boss Joe Royle decided a change was in order in the 65th minute and replaced the below par Darren Bent with Dean Bowditch.
The Blues were very close to going two behind three minutes later, but Bobby Zamora headed Etherington's freekick straight at Kelvin Davis from close range. At the other end, Westlake's cross was bundled to Bywater by a combination of Mackay and Kuqi, as the Blues looked more on top than at any stage in the game.
As the match entered the last 10 minutes, Bowditch tried to force a Richards cross goalwards but was blocked by a defender. Soon after, a Wilnis throw-in was flicked on by De Vos but failed to fall for a Town man inside the box.
With six minutes remaining, Jason De Vos picked up a yellow card for a foul on Marlon Harewood on the edge of the area. Etherington's freekick was blocked, before Harewood, a former Town loanee, sent the rebound over.
On 86 De Vos flicked a Richards throw-in on to Westlake but his shot on the turn from a tight angle was straight at Bywater. The Canadian came close to scoring an equaliser with two minutes remaining, heading a Currie corner powerfully but too close to Bywater, who saved.
As so often when sides are chasing equalisers, the Blues left themselves short at the back and allowed West Ham a second on the break. Harewood got away from Richards and Naylor on the right and crossed to sub Sergei Rebrov. The Ukrainian's shot was blocked by Fabian Wilnis but Matthew Etherington followed up.
Kuqi and Bowditch went wide for the Blues in the closing stages but there was no way back into the game.
A disappointing afternoon for most of the 30,003 crowd, Town only occasionally showing glimpses of their usual form. The first goal was a complete gift, while the second was largely the result of the Blues pushing on for an equaliser.
Neither side played particularly well and the match was almost entirely a scrappy midfield battle which wasn't helped by an over-fussy referee.
The Blues were perhaps feeling the effects of their fourth game in 12 days and manager Joe Royle may well choose to make one or two changes when the Blues face Plymouth at Home Park on Monday.
Town: Davis, Wilnis, Richards, De Vos, Naylor, Magilton, Miller, Westlake, Currie, Bent (Bowditch 65), Kuqi.