Albion suffered a cruel first League defeat for five games at the Bescot Stadium.
Bobby Zamora (twice) and substitute Simon Rodger hit the woodwork during a second half bombardment after Jorge Leitao's early decider for Walsall.
The Seagulls, with 43-year-old Dave Beasant making his debut in goal, suffered a setback before a ball had been kicked in front of a crowd of 8,413.
Injury plagued Paul Kitson hurt himself during the warm up and had to be replaced on the bench by Paul Rogers.
Leitao, on target after seven minutes in Walsall's 2-0 win at Withdean in August, struck at exactly the same time.
The Portuguese front man headed his tenth of the season past a helpless Beasant from Darren Bazeley's cross to the far post.
Steve Coppell's rock-bottom battlers had plenty of possession in the first half and forced several corners without creating many clear cut chances.
That all changed after the break as they overwhelmed Walsall.
Zamora exchanged passes with Paul Brooker to lob against the bar on 49 minutes.
Ten minutes later his header also hit the bar after keeper James Walker clawed away Brooker's cross.
The agony continued for Albion on 63 minutes as Rodger, on for the second half in place of the injured Richard Carpenter, crashed a shot from a Paul Watson cross against the upright.
The Seagulls had several other opportunities in the second half. Brooker's toe-poke was cleared off the line by Ian Roper, while Walker made superb saves from late headers by Watson and then substitute Gary Hart in the 90th minute.
Beasant had little to do by comparison. He made amends in the first half by thwarting Leitao's and David Zdrilic's follow-up after spilling a shot by Steve Corica.
Beasant also made a brilliant one-handed stop at full stretch from Zdrilic midway through the second half as Walsall somehow held on for their first League win in seven games.
They now have a 13 point cushion over Albion, who have Tuesday's home game against Beasant's old club Wimbledon in hand.
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