Having drawn the first eight games in the tournament, Anand was expected to hold fort against Carlsen but the Indian ace cracked under pressure and went on to lose his first game in the tournament.
The loss has not only cost him valuable rating points but also put Anand in an unthinkable fifth spot in the six-player double round-robin tournament.
On what turned out to be the most exciting day of the event, Italian Fabiano Caruana punished Armenian Levon Aronian for an over-ambitious approach while local hopeful Francisco Vallejo Pons slipped from another highly promising position and went down to Sergey Karjakin of Russia.
With just one round to go, it's Carlsen against Caruana for the top spot as they continue to share the lead on 16 points under the soccer-like scoring system that gives three points for a win and one for draw.
These two are followed by Aronian on 10 points while Karjakin now stands fourth - a point behind the Armenian.
Anand with eight points, is on fifth spot, three points ahead of Vallejo Pons.
It turned out to be an utterly forgettable day in office for Anand in the Sokolsky variation that Carlsen played against his Sicilian defence.
The opening was quite peaceful and Anand maintained the balance but in the middle game his position collapsed in very quick time.
Carlsen in fact gave a temporary pawn sacrifice to create some weaknesses in Anand's position and then at the right time came up with some spectacular manoeuvres that left Anand defenceless.
Almost running out of moves towards the end, Anand resigned on move 30. For Anand, this was the second loss ever against Carlsen in classical games. The previous instance was in 2009 when Anand had lost in Linares tournament.
If Carlsen thought he had done his bit defeating the world champion he was in for a big surprise as Fabiano Caruana defeated Aronian in splendid fashion.
A closed Ruy Lopez was followed by some strategic manoeuvres and in a balanced middle game, Aronian went for an unwarranted complications after sacrificing a knight for two pawns.
Caruana was in his elements thereafter. The Italian calculated like a machine and carried out his plans to perfection.
First it was a slow improvement and when the position warranted, Caruana launched a king side attack to finish matters in 39 moves.
For Aronian, it was a shocking defeat while Italy's first son in Chess revelled in glory defeating another higher ranked player. The victory also enabled Caruana to seal his place in the top-five of world rankings for now.
For Vallejo Pons, it was another day of heartbreak. The lowest ranked player in the tournament spoilt another chance to score a victory and instead lost to Karjakin out of his pet French defence.
Karjakin went for a tactical skirmish on the king side but Vallejo Pons was quite up the task on the other flank and as it happened, the Spaniard was quite superior in the middle game that ensued.
However, with the clock ticking away, Vallejo Pons made a series of errors and the finale came through a forced checkmate.