Sligo started the first half promisingly with a Joseph Ndo free kick 25 yards out causing some anxious moments in the Derry defence.
Derry were incensed they weren’t awarded a penalty after 20 minutes when Barry McNamee was taken down a couple of yards to the left of the Rovers goal.
Sligo looked the more threatening side and took the lead after 37 minutes when Lee Lynch cracked the ball past the Derry Keeper.
Sean Houston had a great chance to level matters seconds before half-time but Sligo somehow managed to get the ball clear.
But Derry were left with a mountain to climb eight minutes into the second half when David Cawley doubled Sligo’s advantage.
Things got worse for Derry when they were reduced to 10 men in the 68th minute when Patrick McEleney was sent off for a tackle on David Cawley.
Ross Gaynor scored the resulting penalty as Derry City’s 10-game unbeaten run came to a shuddering end.
SLIGO ROVERS: Rogers, Keane, Peers,McMillan, Davoren, Millien, Lynch, Ndo, Cawl;ey, Gaynor, Greene.
Subs: Ventre for Lynch 73 mins, Martin for Gaynor 76, Henderson for Millien 87.
DERRY CITY: Doherty, McCaffrey, Molloy, S McEleney, Griffin, P McEleney, McBride, Houston, Patterson, Madden, McNamee.
Subs: Rafter for Griffin 61mins, Duffy for P McEleney 61.
Referee: D McKeon.