كتب : Hatem Maher
The African champions had the upper hand in a goalless first half but an unexplainable stumble in the second helped Algeria claim a comfortable win.
Three goals from Karim Matmour, Abdelkader Ghezzal and Rafik Djebbour gave Algeria precious three points.
Playmaker Mohamed Abou-Treika scored a late consolation for the visitors.
Egypt, who are yet win after drawing with Zambia in their previous game, lie at the bottom of Group C on just one point from two games.
Algeria moved top with four points, ahead of second-placed Zambia on goal difference.
With four matches to go, Egypt will have a mountain to climb if they are to end their World Cup jinx and reach the elite tournament for the first time since 1990.
They will head to South Africa to take part in the Confederations Cup before hosting Rwanda, who also have one point, in their next qualifier on July seventh.
Algeria failed to break through Egypt's tight defense in the first period as keeper Essam Al-Hadari was not troubled. The hosts relied on some tame crosses from the right and left flanks.
The Pharaohs' steadfast midfield played a key role in keeping Algeria forwards at bay, thanks to a fine defensive display from Hosni Abd-Rabou and Mohamed Shawky.
Egypt had two decent opportunities to break the deadlock late in the first half.
In the 35th minute, Abou-Treika latched onto a long ball inside the area to send a left-footed volley that hit the side-netting.
Mohamed Zidan tried his luck two minutes later but his powerful right-footed shot missed the target.
Sudden Collapse
A resurgent Algeria came up in the second half to capitalize on a sudden and unjustifiable collapse from Egypt and condemn them to an embarrassing defeat.
The Desert Foxes were unlucky not to open the scoring three minutes after the restart.
Al-Hadari's hesitancy allowed Matmour to head a right-wing free kick goalwards but defender Ahmed Saied 'Ouka' cleared his effort off the line.
The Borussia Monchengladbach striker made amends on 60 minutes when he ran unopposed towards the area before drilling a low shot that found its way past Al-Hadari, whose reaction was very slow.
Siena forward Ghezzal heaped more misery on Egypt four minutes later.
He rose unmarked to head Nadir Belhadj's cross into the net as Al-Hadari was once again at fault for not jumping to collect the ball in the air.
Djebbour completed the rout in the 77th minute when he raced onto a through pass amid no resistance from defenders to slot home from close range.
Egypt coach Hassan introduced veteran midfielder Ahmed Hassan, winger Ahmed Eid and striker Ahmed Raouf in a bid to add any zeal to the seemingly jaded team.
The six-time Nations Cup winners improved but their surge was too late to help them take something from the game.
Four minutes from time, a defense-splitting pass from Eid released Abou-Treika, whose first shot was blocked by the keeper but his follow-up gave Egypt their sole goal.