The npower Championship leaders missed an early penalty through Billy Sharp, but after that it was all Blackpool, with Stephen Dobbie scoring from the spot and grabbing a second before Ian Evatt wrapped things up.
Southampton remained six points clear of third-placed West Ham after the Hammers were beaten by Reading, but the Royals are now just two points off top spot.
The defeat was just Southampton’s second loss in 13 Championship games and manager Nigel Adkins was refusing to panic.
“We will analyse this in the cold light of day,” he said.
“We have been in the top two in the league for virtually the whole campaign and so we will just put this game to bed and move on.”
West Ham boss Sam Allardyce admitted it was time to go all out after Reading came from a goal down to beat his side 4-2 at Upton Park.
Allardyce said: “There are no more opportunities for us to take a point any more.
“To keep up with Reading we have to win six on the trot.”
Brighton and Middlesbrough had to settle for a 1-1 draw at the Amex Stadium in the clash between two play-off hopefuls.
Marvin Emnes gave Boro a 62nd-minute lead which was cancelled out by Inigo Calderon 12 minutes later.
Leeds boss Neil Warnock was left fuming as two goals from Chris Iwelumo earned Watford a 2-0 win at Elland Road.
Warnock, whose side had Paul Connolly sent off in the dying stages, said: “I think we are miles away from where we should be. I couldn’t see us scoring in a brothel.”
Coventry climbed out of the drop zone for the first time since October with a 2-0 win at out-of-form Hull.
Bristol City slipped into the bottom three despite a 1-1 draw at home to Derby.
Portsmouth suffered a humiliating 5-1 loss against Burnley at Fratton Park.
Radoslaw Majewski scored a second-half hat-trick as Nottingham Forest eased their relegation fears with a 3-0 win over Crystal Palace.
And Cardiff’s play-off challenge took a further dent as they recorded their fourth successive draw in a goalless stalemate with Millwall.
Daryl Murphy scored the only goal as Ipswich beat Barnsley 1-0.
Meanwhile in League One, Preston manager Graham Westley has accused four of his players of leaking his lineup to the opposition a day before their English third-tier match at Sheffield Wednesday on Saturday.
Preston, who are 16th in the 24-team table and not yet clear of relegation, lost the game 2-0.
“To stand in the dugout ... and be told by their dugout that four of our players had given our side across to them says where our side is at,” he told the club website.