The 17-time Grand Slam champion, playing in his first Davis Cup final at the age of 33, was clobbered 6-1, 6-4, 6-3 by flamboyant Frenchman Gael Monfils.
It was just the second time that Federer had lost a Davis Cup singles rubber in straight sets -- the other coming in his debut as an untested teenager in 1999 against Gianluca Pozzi of Italy.
Earlier, Stan Wawrinka had given the Swiss favourites a 1-0 lead by outplaying French number one Jo-Wilfried Tsonga 6-1, 3-6, 6-3, 6-2.
But if Wawrinka's demolition of Tsonga could hardly be classed as an upset, the Swiss being ranked fourth in the world to Tsonga's 12th, Federer's humiliation at the hands of Monfils was stunning.
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Federer took a 8-2 winning head-to head record against Monfils into the rubber.
But his preparations for his first ever Davis Cup final took a hit last Saturday when he injured his back playing, ironically against Wawrinka, in the last four of the ATP World Tour finals in London.
He subsequently pulled out of the final against Novak Djokovic and was unable to practice on the indoor claycourt at Lille football stadium until Wednesday evening.
In all it took the Frenchman just 1 hour and 46 minutes to win, for the first time on clay, against Federer.
And there was no inkling of a repeat of their US Open quarter-final tie in September when Monfils let slip a two-set lead, and spurned two match points, before losing to the Swiss.