The Hatters' had skipper Kevin Nicholls sent-off as their unbeaten record in the Blue Square Premier came to an abrupt end at league leaders Oxford United.
Two goals in the first 16 minutes of the highly-charged encounter - watched by over 10,000 at the Kassam Stadium - got Chris Wilder's men on their way.
That was not before Mark Tyler had come to the Hatters' rescue before the opener when he blocked James Constable's fifth minute penalty after he was fouled by Rossi Jarvis.
Seconds later Matt Green's surging right-wing run and cross found Constable who made no mistake this time to thump an easy finish past Tyler for his sixth goal of the season.
The Hatters were on the rack and&nbsp;on 16&nbsp;minutes the U's doubled their lead when new signing Jamie Cook curled home a beautiful left-foot shot from the edge of the penalty area beyond the despairing dive of Tyler.
After the goals the Town took control but for all their possession the in the first half the closest they came to pulling a goal back came on 19 minutes when Alan White volleyed over from close range from Nicholls' free-kick.
The Hatters begun the second period full of confidence with Kevin Gallen linking the play well and Adam Newton causing havoc down the right flank.
Gallen and Newton combined superbly on 52 minutes and Tom Craddock was denied by a brave block by U's centre-half Luke Foster as the Town searched in vain for a goal.
However it all turned sour for Hatters four minutes later when Nicholls was shown a straight red card for cynically upending Green down the right-hand touchline.
Despite going down to 10 men the Town still continued to create chances and a lovely move involving Gallen, Freddie Murray and Craddock saw the latter force home goalkeeper Ryan Clarke into a double save, firstly blocking the striker's toe-poke and then blocking the follow-up.
As the game wore on and the minutes ticked away, Oxford began to play keep ball as the Hatters' 10 struggled to make an impression on the confident hosts.
LutonTown: Tyler, Keane, White, Pilkington, Newton, Nicholls, Craddock (Donnelly 73), Blackett (Murray 46), Hall, Jarvis, Gallen.
Subs not used: Gore, Howells, Basham.
Oxford United: Clarke, Batt, Bulman, Foster, Creighton, Murray, Constable, Clist, Kinniburgh, Green (Chapman 67), Cook.
Subs not used: Turley, Sandwith, Midson, Potter.
Referee: B J Malone.
Attendance: 10,613 (including 2,331 from Luton)
For a minute-by-minute breakdown of how it happened, see below.
Live from&nbsp;Kassam Stadium&nbsp;- Press F5 to refresh
Oxford United 2 (Constable 5, Cook 16)
Luton Town 0
FULL TIME - &nbsp;It's all over here at the Kassam and it's the first time the Town have tasted defeat this season going down to the league leaders. All the reaction and match action to come on lutontown.co.uk. Keep the faith.
90 mins - We've got three additional minutes to be played here, as indicated by the fourth official.
90 mins - Things are certainly winding down to a close here but Tyler pulls of a fantastic save to keep it at two when somehow getting a glove on substitute Adam Chapman's drive from 18 yards and turn it over the crossbar.
84 mins - The oles are ringing around the Kassam as Oxford play keep ball. But they need get in trouble as they give the ball away to Jarvis who feeds Donnelly who stays onside to drill a low shot goalwards that is kept out by a full stretch save by Clarke.
76 mins - Let off for the Town as Tyler does well to cut out a sloppy back-pass from Jarvis with Dannie Bulman bearing down looking for the hosts' third.
73 mins - Second change from Mick as George Donnelly replaces Tom Craddock.
70 mins - Not much more to report I'm afraid as&nbsp;Constable - anonoymous since his early goal - drives a vicious shot goalwards that takes a deflection off White and behind for a corner. The Hatters need something to happen quick with 20 minutes left...
62 mins - Since Nico's sending off the Town are now playing with Craddock and Gallen as a two up top and Jarvis, Hall and Newton across the middle. Time is running out but can we get one? We need one but it's just not falling for us.
60 mins - Oh super stuff from the Hatters as Murray, Gallen and Craddock combine with neat intricate passes that set-up Craddock who is twice denied by Clarke in the home goal. His first chance&nbsp;was poked goalwards and well stopped and the follow-up was quickly snaffled by the stopper. Unlucky...
56 mins - &nbsp;OFF - Well that good start from the Town takes a major setback when Nicholls is given a straight red card for a cynical foul on Green right by the dugouts. Referee Malone had no hestitation to brandishing that one. Oh dear.
52 mins - All positive from the Hatters can they get one back? Gallen meets Keane's right-wing cross but it lacks the power and direction and it's easy for Clarke.
52 mins - Lovely move from the Town. Gallen plays a lovely ball inside the Oxford left-back to feed Newton. He surges into the box and squares for Craddock but he sees his shot blocked by Foster. The ball falls to Jarvis on the edge of the area but the midfielder hits his first-time shot well over the bar.
48 mins - Craddock again does well to turn inside Batt and squares the ball to Hall but the Hatters midfielder is put off by the attentions of Foster and his shot spoons high and wide of Clarke's goal.
47 mins&nbsp;- Certainly a bright start from the Town. Firstly Murray is denied by a good tackle by Batt. Hatters fans think its a penalty but it wasn't from angle. Then Craddock meets a high cross from Keane but is penalised for handball.
46 mins - It's the Hatters who get us underway in this second period kicking towards the open end. Mick's boys need an early goal and then we've got a game on our hands. Come on you Hatters!
21:04 - Those boys in all white are back out on the pitch, and there's a change. Freddie Murray is on for Blackett.
21:03 - Oxford are back out on the pitch ready for the second half and the Town are keeping them waiting. While I'm waiting I've been handed the attendance. 10,613 including 2,331 from Bedfordshire. Apparently that's the second highest in the Conference...
HALF TIME Referee Malone calls time on the first half action and the Town have it all to do. Oxford have a two-goal thanks to two goals in the opening 16 minutes, the second of which was a right rocket that Tyler had no chance with it. The Hatters may have shaded possession but they're not making it count. Let's hope Mick can rally the boys for the second period on this crucial evening. Come back to us in 15 minutes for the second half.
45 mins - Third minute of stoppage time and it should be 3-0 to Oxford. Green again gets down the right. It's two v two and more home attackers are flooding into the box. One of those is Simon Clist who's late burst goes unnoticed. He collects the ball and swivels goalwards but before he knows it he's surrounded by a combination of Keane and White who do enough to&nbsp;block the chance. That was close.
45 mins - Not much more action to report but we've got three added minutes to get a goal back. Come on!
39 mins - Oxford spring into life down the right. That's where they've been most danger. Green terrorised Blackett cutting inside and finding himself in the area. White gets across to put the tackle in and then does well to block Green's follow-up shot. Good defending.
37 mins - I've just noticed at the top of the page I'd put "live from Kenilworth Road" - changed. We're at the Kassam. Definitely.
35 mins - Town are certainly on top and getting their passing act together. It just seems to be that final ball. Just as I say that Blackett attempts to cross high into the box but he gets the connection all wrong and the ball sails harmlessly over Clarke's crossbar.
34 mins - Another guilt-edged chance goes begging for the Hatters. Craddock latches onto a poor defensive header to get to the byline. All he needs to do is square the ball but there aren't many options. He tries to pick out Gallen but Clarke in the Oxford goal beats him to it to cut out the cross. Chance.
30 mins - Booking for Batt for the hosts as he scythes down Blackett as he ghosts past his marker but from the resulting free-kick Nicholls can't pick out a team-mate.
27 mins - Nicholls floats in a corner from the right but Hall - trying an acrobatic effort from 12 yards - can't make contact and the hosts are able to clear.
26 mins - Good period for Town now. Craddock pings a cross from the left flank right on to the head of White. Not sure why he was still in the attack but he can only glance his header wide of Clarke's left-hand post.
24 mins - That's better from the Hatters. A patient build up cumulates in Blackett swapping passes with Hall to fire a left-foot shot over Ryan Clarke's crossbar. It was always rising but more encouraging.
19 mins - Super chance for the Town goes begging. Nico drifts in another set piece and the ball drops at the feet of White who volleys over the bar with the goal gaping. What a chance.
16 mins - GOAL &nbsp;OXFORD 2-0 Hatters. Oh dear. What was I saying? Hatters fail to clear Jamie Cook's corner which comes back out to the midfielder, who hits an absolute pearler into the top left-hand corner of the net past the dispairing dive of Tyler. Nothing the keeper could do about that one. Great strike. But now it's 2-0. An uphill task now.
10 mins - I'm reliably informed that this is the first time the Hatters have gone behind on their travels this season. Conversely when the Town have gone behind - at home to Mansfield and Gateshead - they've gone onto to win. Third time lucky?
9 mins - An explosive start. I'm difficult keeping up. Just as I say that the ball falls to Hall who tries his luck from distance which is deflected behind for a corner.
8 mins - Great chance for the Hatters. Nicholls floats a central free-kick to the back-post which Alan White heads across goal. It looks like Shane Blackett's all set to head the ball home but his effort is blocked. Hall tries the follow-up but Oxford clear their lines.
5 mins - GOAL &nbsp;OXFORD 1-0 HATTERS - Short lived joy for the Town as Matt Green surges down the right flank to find Constable unmarked who smashes the ball past Tyler who stood no chance. Would you believe it?
5 mins - Constable hits it but Tyler - like so often this season is the hero, blocking the strikers shot. Top save!
3 mins - PENALTY TO OXFORD - Jarvis has fouled James Constable. He's been booked for his troubles. It'll be Constable v Tyler...
1 min - It's 8.01pm and it's Oxford that get us under way. You can't swing a cat inside the Kassam and people are STILL outside! Sit back and enjoy the updates. Come on you Hatters!
19:54 - Here come the two sides into the cauldron. A fantastic noise. Full of colour. Nico leads his troops out and after the handshakes the players applaud the Hatters hordes. The Town are in all white, Oxford yellow shirts, navy blue shirts, navy socks.
19:52 - There seems to be about a million people still on the roads in Oxford. In the distance I can see cars still attempting to park. The ground is filling up nicely with the Hatters contingent in fine voice as they battle against 7,000 locals.
19:37 - Kick-off here is delayed by 15 minutes due to congestion outside the ground. We'll be kicking off at 8pm - stay tuned!
19:36 - The atmosphere is building here at the Kassam Stadium as two sets of supporters being to test their vocal chords ahead of what promised to be a fantastic encounter.
19:10 - TEAM NEWS
Hatters manager Mick Harford makes two changes to the Town side that drew 1-1 at Salisbury City on Saturday.
Claude Gnakpa has not recovered from a dead leg sustained in Wiltshire so Keith Keane drops to right-back and Asa Hall moves into midfield alongside skipper Kevin Nicholls and Rossi Jarvis.
There's a change at the back for Town as well as Shane Blackett comes in for Freddie Murray at left-back.
Oxford&nbsp;boss Chris Wilder, meanwhile, names an unchanged side after winning 2-0 at Ebbsfleet United at the weekend.
Luton Town: Tyler, Keane, White, Pilkington, Newton, Nicholls, Craddock, Blackett, Hall, Jarvis, Gallen.
Substitutes: Gore, Howells, Basham, Donnelly, Murray.
Oxford United: Clarke, Batt, Bulman, Foster, Creighton, Murray, Constable, Clist, Kinniburgh, Green, Cook.
Substitutes: Turley, Sandwith, Chapman, Midson, Potter.
Referee: B J Malone.
Good evening once again to those readers&nbsp;of our text updates service as the Hatters face their biggest test of the season at league leaders Oxford United at the Kassam Stadium.
Both sides are unbeaten in their eight matches so far this season and this fixture is one if not the biggest matches in the Blue Square Premier with a huge crowd expecting including over 2,000 making the journey from Bedfordshire.
And we've got all the minute-by-minute action covered in a variety of ways this evening.
There's none of those boring ball-by-ball "defensive thrown-in taken by Luton left-back" text commentaries here!
So remember to follow us throughout the match on lutontown.co.uk and on Hatters Player for live commentary from the legendary Simon Statto Pitts.
Afterwards Hatters Player subscribers will get to watch all the post-match interviews from all the men that matter tonight.
For those without Hatters Player fear not: we'll have plenty of content to keep you interested as we'll have Mick's post-match thoughts as well as match action to follow after the final whistle.
And if you want more and feel like interacting with us and fellow Town fans, don't forget we're also on twitter and Facebook so feel free to get involved! Join the updates and get in touch!
The lads are looking for three points and to stay unbeaten! Come on you Hatters!