The Hatters' were made to rue the misses of several first half chances as their 13-match unbeaten run in the Blue Square Bet Premier came to an end at Holker Street.
After Aaron O'Connor
and Craig McAllister had missed two good chances to break the deadlock in the first half it was Alex-Ray Harvey's goal on 73 minutes that ultimately proved the difference.
And with Fleetwood and Wrexham both winning the Hatters fell further behind in the race for the title.
The Town began brightly at a gusty Holker Street, Stuart Fleetwood having an early sight of goal inside the first minute that went wide before Aaron O'Connor
hooked a shot over the bar a minute later.
Barrow's forays into the Hatters' half were few and far between but a right-wing raid on five minutes almost caused panic in the Town defence but cool, calm and collected defensive work from Keith Keane and O'Connor cleared the danger.
On 13 minutes Craig McAllister - one of two changes from the side that beat Tamworth at the weekend - headed straight at home goalkeeper Shaun Pearson following Keane's right-wing cross.
Seven minutes later the Town spurned a great chance to make it 1-0 when O'Connor headed straight at Pearson when left unmarked in the six yard box following a inch-perfect cross from Greg Taylor.
Fleetwood was impressing with his pace down the left and his cross on 25 minutes almost found Jake Howells and O'Connor in the box before McAllister failed to get a touch to excellent deep right-wing cross from Howells two minutes later.
Chances for Barrow were few and far between and after Janos Kovacs was shown a yellow card on the half-hour, McAllister missed a glorious chance to break the deadlock on 35 minutes when he did the hard work to beat his man eight yards from goal before blazing the ball high and wide of Pearson's goal.
The conditions began to deteriorate as half-time approached with the gusty wind joined by swirling rain and on the stroke of half-time the Town almost went in a goal up when Taylor's left-wing cross was caught in the wind and almost dropped underneath the crossbar.
Five minutes after the break the Hatters were given a real scare when Andy Cook robbed Kovacs of the ball inside the penalty area and flashed a firm shot inches past Mark Tyler's left-hand post having cut inside Keane.
Chances were at premium as the wind, rain and a heavy pitch made it difficult for both sides to call either goalkeeper into evasive action. Indeed the only real talking point in the opening 20 minutes of the second period was an inexplicable booking for Fleetwood for accidentally running into the referee.
Andre Boucaud, who was the on the receiving end of two challenges from Barrow was withdrawn on 68 minutes for Adam Watkins having picked up a yellow card for arguing his cause against the fouls against him.
But just like in the first half it was only one side in, with this time the hosts bossing things playing with the wind at their backs and Jack Mackreth's pass across goal should have seen the hosts lead but no man in white was on hand to tap home on 71 minutes.
However, as the Hatters continued to struggle in creating a chance at the right end, disaster struck on 73 minutes. The Town failed to clear their lines down the Barrow left and following a fine interchanging move on the edge of the area, Harvey swept the ball past Tyler with a shot that rolled home in off the post.
The Town huffed and puffed in search of an immediate response with Brabin introducing John Paul Kissock with 10 minutes left.
It wasn't until two minutes from time that the Town forced home stopper Pearson into a save when Kissock blasted a free-kick through the Barrow wall that the keeper held.
Barrow almost made it 2-0 right at the death when Andy Cook turned a near post flick onto the post but that was the final action and after three added minutes Barrow held on to secure victory.
It's FA Trophy action for the Town on Saturday when they take a break from league action when Gateshead are the visitors to Kenilworth Road.
See you then.
For minute-by-minute analysis see below
Result from Holker Street
Barrow&nbsp;1 (Harvey 73)
Luton Town 0
FULL-TIME All over here at Holker Street, the Town's 13-match unbeaten run comes to an end. Full report, photographs and reaction to follow.
90 mins - Into the last minute, Barrow go close to making it 2-0. Cook turning a near post shot onto the post with Tyler beaten. The ball is at the wrong end of the field at the minute...three added minutes here...
88 mins - Hatters pushing, Kissock wins a free-kick 20 yards from goal which he takes. He blasts through the wall, it takes a deflection but it's into the arms of Pearson.
85 mins - Five minutes left here for the Town to find a late equaliser.
83 mins - Almost a sniff for the Hatters, Pearson with his first real piece of work in the second half, gathers Kissock's neat pass looking for the run of Fleetwood.
80 mins Another change for the Town, McAllister off for John Paul Kissock. 10 minutes left here.
75 mins - 15 minutes for the Hatters to find an equaliser.
73 mins &nbsp;GOAL! BARROW 1-0 Town (Harvey) - Bad news. The Town fail to clear their lines down the right flank enabling the Bluebirds to piece together a tidy move down the left which eventually falls to ALEX-RAY HARVEY who slots a shot home, in off the post giving Mark Tyler no chance.
71 mins - Close shave for the Town as Mackreth runs down the right and sends a low cross scuttling across the face of goal but no Barrow man is there for what would have been a tap in.
68 mins First change for the Town as Andre Boucaud is replaced by Adam Watkins. Chances at a premium here.
55 mins - Attendance here at Holker Street of 925 which includes 70 making the trip shouting for the Town. Stoppage in play as Boucaud goes down, insencing the Hatters players and staff. After all of that Boucaud is booked.
50 mins - Almost a sniff for Barrow as Andy Cook robs Kovacs off the ball, cuts inside and blasts a shot at goal that flashes inches wide. Phew.
46 mins And we're off for the second half...no changes here.
HALF-TIME And that's the break here, the Town have had their chances but it's goalless at the interval. Check back in the second half for all the updates. COYH.
45 mins - Half a sniff, Taylor hangs up a cross which hits the crossbar having been caught up in the wind.
40 mins - Five minutes to the break here. Still goalless.
35 mins - And another big chance for the Town as McAllister flashes a shot high and wide after doing well to beat his man in the box after O'Connor header into the striker's path.
30 mins - Half an hour on the clock, Janos Kovacs is the first man in the book for a challenge on a Barrow man. Leading with his elbow, according to the referee's signal but thankfully for the Town it's a yellow card for the big Hungarian.
27 mins - Another chance for the Town, Howells, down the right, gets the ball onto his left foot and whips in a lovely ball to the back stick that McAllister can't quite get on the end of.
25 mins - Town break once more down the left with Fleetwood and he hangs a cross into the box looking for Howells and O'Connor but neither can get a shot away and Barrow clear.
20 mins - CHANCE. And the Town should lead, as O'Connor - onside- heads straight at Pearson with the goal gaping following Taylor's perfect cross from the left. Shoiuld be 1-0. It's not.
13 mins - First real effort on target for either side as McAllister's header finds the gloves of Shaun Pearson in the home goal following Keane's right-wing cross. It's comfortable for the Bluebirds' stopper.
5 mins - Hatters on top here, playing with real flair in those orange shirts. No real chances of note so far as Barrow break into the Town half for the first time and Keane and O'Connor do well to clear the danger.
2 mins - Two early sighters for the Town as McAllister shoots wide, O'Connor hooks over for a corner.
2 mins - Town playing 4-3-3 with Keane at right back, Lawless, Howells and Boucaud in centre mid, O'Connor and Fleetwood on the flanks and McAllister down the middle.
1 min Annnnnd we're off as the Town get us off and underway here. COYH.
19:42 HERE THEY COME
Out come the two sides, the Town all in orange tonight.
19:35 PRESS BOX PREDICTIONS
Not many of us here...Andrew Barringer: 1-0 Luton, Simon Pitts: 1-0 Luton, Mark Wood: 2-0 Luton.
19:32 SCARVES FOR LOYAL FANS
Town directors and players are handing out free scarves to the Town fans.
19:30 FROM THE DUGOUT
Barrow boss Dave Bayliss: "Opposition doesn't come any bigger than Luton Town, tonight's visitors. I had four seasons at Kenilworth Road and know how just&nbsp; big the club is. It was savage points deductions by the Football League - for financial indiscretions that inevitably had to be punished that saw the them lose their Football League place."
19:10 THE TEAMS
Town: Tyler, Keane, Pilkington, Kovacs, Taylor, Lawless, Boucaud, O'Connor, Howells, Fleetwood, McAllister. Subs: Kidd, Crow, Blackett, Kissock, Watkins.
Barrow: Pearson, Smith, Skelton, Bolland, Hone, Mackreth, Baker, Owen, Harvey, Cook, Turner. Subs: Cairns, Nicholas, Rutherford, Ferrell, Moyo.
The hosts, managed by former Hatter Dave Bayliss, are unchanged from their 3-0 win over Kettering at the weeekend.
19:06 TWO CHANGES
Keith Keane and Craig McAllister start for the Town at Holker Street.
18:55 IT'S DARK OUT THERE
Well, yes, obviously, you say. But there's only one floodlight on at the moment as Mark Tyler, Lewis Kidd, Adam Watkins and John Paul Kissock warm up.
18:00 TO BARROW AND BACK
The longest journey of the season. On a Tuesday night. In February.
It takes dedication and character to deal with nights like these.
The loyal supporters, players and directors of Luton Town Football Club won't be home until the small hours of the morning, maybe at a time when others might be getting up for work.
But, as Gary Brabin said earlier today, wherever, whoever and whenever his side play, there can be no excuses. The Town boss spoke of the need for his players to show a mental toughness ahead of tonight's trip to Barrow. 250 miles from home on a cold February night, the Hatters will need to call upon their reserves of a whole host of attributes. Character, ability, teamwork.
As Fleetwood and Wrexham have already found to their cost, Holker Street is not an easy place to come. It's a massive cliché but it seems a trip to this part of the world really is.
In their past two visits here the Hatters have triumphed 1-0 on each occasion. Brabin will be hoping his the class of 2011/12 make it three in a row.
All you need to do is believe.
Well, whatever happens today, and indeed throughout the season, your official website will have everything covered: every step of the way.
If you can't make the match then we'll have all the goals and incidents as it happens live with the usual news in the run-up to kick-off with team line-ups and plenty of chat as your official website has, as ever, the usual updates keeping you bang up-to-date with all the action - and in a number of ways.
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