Key Moments
The London club's chances of qualifying automatically for the European Cup knockouts were suffered a setback as their Italian opponents fought back to triumph in Bergamo.
Each club went into this game with identical records in the league phase of this season's tournament, having won, drawn, and lost to sit on 10 points.
For extended periods there was very little to separate them in this contest too, even though Chelsea took the lead in the first half when the Brazilian converted the captain's cross.
But The Serie A side always looked a threat going on the attack, with ex- Charlton and Everton attacker Ademola Lookman problems for the defence.
James shot wide in the after the break but Atalanta increased the intensity and deservedly drew level when former West Ham United striker Gianluca Scamacca a centering pass.
Alejandro Garnacho hammered a powerful shot straight at the keeper but they got the decisive strike in the closing stages when the Blues defenders backed off Charles de Ketelaere, who took full advantage with a powerful shot.
Chelsea attempted to rescue a point late on but a superb stop by Marco Carnesecchi kept out Joao Pedro.
The result means Chelsea drop out of the top eight—the spots that progress automatically for the knockouts—to 11th with two group stage matches remaining.
Atalanta, in contrast, leap up to third, three points ahead of the Londoners.
This was a deeply frustrating result for Chelsea as even a draw was leaving them well placed to secure the top eight finish they require to avoid the lottery of the play-offs.
But they let their concentration slip in their defensive duties with seven minutes left on the clock and their opponents took full advantage.
The Italian side are in fine fettle at the moment so this was always going to be a difficult examination for the visitors, but they will be frustrated to be leaving with no points after securing the early advantage.
But the wider issue is that this perpetuates Chelsea's concerning streak of form in all competitions.
Since defeating Barcelona 3-0 at the close of November they are now winless in their last four outings.
Manager Enzo Maresca enacted five rotations for this game as he persisted with his run of rotating players in and out of the starting lineup.
The rotations here followed after he made the identical amount for the defeat to Leeds United and six for the tie with Bournemouth prior to the journey to Atalanta.
The coach will view squad rotation as vital as he attempts to handle players' workloads and challenge both at domestically and abroad, but he maintained the core group of players stays the unchanged for key fixtures.
"I think in this match [in] the starting lineup we had eight or nine players who played against Tottenham, Barcelona, and the Gunners," he said.
"If you see the five alterations that we made compared to Bournemouth it is a change but it involves the same eight or nine players playing in that match.
"The ones who took to the field tonight are the ones who feature in almost all the games."
Chelsea's next Champions League game sees them host the Cypriot side on the coming Wednesday (20:00 GMT).
Atalanta, on the other hand, host Athletic Club at the identical kick-off time.
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Barry Roberts
Barry Roberts
Barry Roberts
Barry Roberts
Barry Roberts