Marc Marquez's misfortune was Cal Crutchlow's gain as the British rider claimed just his second MotoGP win at the Australian Grand Prix.
Newly-crowned world champion Marquez of Repsol Honda was out to party in Victoria on Sunday after wrapping up his third title in Japan last week.
However, pole-setter Marquez crashed when leading with 18 laps remaining and LCR Honda's Crutchlow took over as the heavy rain, which plagued the event on Friday and Saturday, stayed away at Phillip Island.
Crutchlow and six-time Australian champion Rossi (Movistar Yamaha) were left to battle it out for first place after the latter produced a sensational performance following his worst qualifying display since 2011, climbing from 15th to second in stunning fashion.
But Crutchlow held off the fast-finishing Rossi for a famous win, with his only previous victory coming in the Czech Republic earlier this year.
Maverick Vinales completed the podium places, while Andrea Dovizioso and Pol Espargaro wrapped up the top five.
TITLE CELEBRATION DOESN'T GO TO PLAN FOR MARQUEZ
For the second time in three years, Marquez crashed out at Phillip Island.
While he reigned supreme on the coast of Victoria last year, the Spaniard fell off his bike while leading the Australian race in 2014 and he suffered the same fate this weekend as conditions cooled.
It was the first time Marquez failed to finish a race this season but mattered little, with the world title already wrapped up.
AS CRUTCHLOW POUNCES
Crutchlow stormed out of the blocks at Phillip Island, after qualifying second fastest for Sunday's race.
The 30-year-old, who ended Britain's 35-year wait for a MotoGP win in August, went neck-and-neck with Marquez until the world champion's front end washed out at turn four.
Crutchlow then stole the show, opening up a three-second lead over Rossi with 12 laps to go and he never looked back.
ROSSI RECOVERS IN STYLE
Second in the world standings, Rossi endured a difficult weekend up until Sunday.
The Italian great missed out on qualifying for Q2 on Sunday, ultimately finishing 15th for the big race.
But Rossi recovered remarkably, quickly hunting down the pack to come within a whisker of victory.
1. Cal Crutchlow (LCR Honda) 40 minutes, 48.543seconds.
2. Valentino Rossi (Movistar Yamaha) +4.218s
3. Maverick Vinales (Suzuki Ecstar) +5.309s
4. Andrea Dovizioso (Ducati) +9.157s
5. Pol Espargaro (Monster Yamaha Tech 3) +14.299s
6. Jorge Lorenzo (Movistar Yamaha) +20.125s
7. Scott Redding (OCTO Pramac Yakhnich) +28.369s
8. Bradley Smith (Monster Yamaha Tech 3) +28.781s
9. Danilo Petrucci (OCTO Pramac Yakhnich) +28.792
10. Jack Miller (Estrella Galicia) +28.815s
Marc Marquez - 273 points
Valentino Rossi - 216 (+57)
Jorge Lorenzo - 192 (+81)
Maverick Vinales - 181 (+92)
Dani Pedrosa - 155 (+118)
It is the penultimate round next week as the MotoGP season heads to Malaysia. A sell-out crowd is expected at Sepang International Circuit for round 17.