Defender Ashley Williams emerged for a free header from a corner with five minutes to play as the Gunners never got out of first gear.
Alexis Sanchez put Arsenal in front with a deflected free-kick on 20 minutes but the Toffees deservedly equalised just before half-time after Seamus Coleman netted a rare header.
There was ugly nasty scenes at half-time as Mesut Ozil appeared to clash with Coleman as the teams went down the tunnel and it was the Toffees who came on stronger after the break.
And then, with five minutes to play, defender Williams got a free header from a corner to inflict misery on Arsene Wenger, and throw serious doubts over the Gunners' title aspirations.
Phil Jagielka was sent off in injury time for a second yellow card and will now miss the Merseyside derby.
In the 94th minute, Alex Iwobi's effort was stopped on the line following a crazy end to game which saw stopper Petr Cech desperately throw himself forward for that late equaliser for the Gunners which never came.
It was Arsenal's first Prem defeat since the opening day of the season in August, when they lost to Liverpool 4-3 at the Emirates.
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