Trailing to a first-half goal, England were trying to claw their way back when Smalling allowed aloose ball to trickle past him into the path of Ioannis Papadopoulos,who accepted the invitation to fire his side into what proved a winninglead.
High jump: England midfielder Lee Cattermole tries to get past Greece's Ioannis Papadopoulos
It was a misjudgement ill- befitting a player who will cost United £10million when he finally leaves Fulham in the summer, but the blame for England malaise was hardly his alone.
While there was a purpose and cutting edge to much of group leaders Greece's endeavours, England looked sluggish and were beaten to the ball too easily and too frequently. Nathan Delfouneso pulled a goal back on his debut, but England now trail Greece by five points and will have their work cut out bridging the gap in the two games they have left.
Micah Richards marshalled the England defence in decisive fashion on a bitterly cold evening in South Yorkshire.
There were uncomfortable moments from the start for Pearce's side, but they might have proved even more problematic without a reminder of the sureness that earned the versatile City defender his first senior England cap at the age of 18.
Arm wrestle: Sub Daniel Sturridge (left) battles for the ball with Greece's Savvas Gentsoglou
A last-ditch sliding tackle on Vasileios Koutsianikoulis had to betimed to perfection, just as the Greece winger set his sights on goalin the 15th minute, and even when Elin Dimoutsos looked to have escapedRichards' attentions three minutes later, the England skipper recoveredbrilliantly to regain possession.
There was nothing Richards could do in the 28th minute, though, as Greece went in front.
Dimoutsos' header from an Ioannis Papadopoulos corner was cleared off the line by Tottenham full back Kyle Walker, but centre back Kyriakos Papadopoulos rammed home the loose ball to spark delirious scenes in the visitors' technical area.
Pearce stood stony-faced and could hardly have been enamoured with the sight of his side failing to muster an attempt on goal until the 36th minute, when Tom Cleverley had a shot deflected on to the roof of the net.
Jack the lad: Wilshere challenges Dimitrios Siovas of Greece
Smalling's lapse came in the 48th minute. Richards appeared to have cut out the danger with an outstretched boot that halted a weaving run from Koutsianikoulis, onlyfor Smalling to undo all the good work by somehow failing to heed thelurking presence of Ioannis Papadopoulos just behind him.
By the time he switched on, the Greek midfielder was already setting his sights and drawing back his boot for an unchallenged finish.
Pearce had to make changes, and the introduction of Delfouneso had the desired effect. The Aston Villa forward's debut was barely six minutes old when he forced home a close-range chance, after keeper Asterios Giakoumis failed to hang on to a stinging volley from Walker.
Greece lightning: England striker Andy Carroll can't get past Asterios Giakoumis and Kyriakos Papadopoulos
Pearce admitted he was bitterly disappointed at the manner of his firstcompetitive home defeat in three years but claimed qualification was still in England's hands.
'If we win our two remaining games, we will be on 17 points, and thatshould be good enough to go through as runners-up,' he said. 'But wewill have to do a lot better, particularly in our next game, away toPortugal. We were poor and did not play to a standard acceptable to us.'
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