Aussie James Allenby was Lancashire's destroyer at Liverpool as the home side missed the chance to nail down a place in the last eight of the Twenty20 Cup.
Allenby hit 69 in 45 balls as the Foxes closed on 146-5, before Kiwi paceman Iain O'Brien then took 5-23 as Lancashire were bowled out for 138.
Victory for Lancashire would have enabled them to become the first team to each this year's quarter-finals.
But Allenby's third fifty in seven knocks earned the Foxes a fourth win.
The English-qualified Western Australian was already the top run scorer in this year's competition before Monday night's latest effort at Aigburth.
He he has now moved that total on to 354 in seven knocks. But he needed a lucky break to get going, top-edging Andrew Flintoff's second ball over the head of wicketkeeper Gareth Cross for four.
But he was then largely responsible for Lancashire shipping 53 runs in their next four overs as Allenby opened up.
Flintoff, like Mahmood, went for 17 in one over. And Allenby even put the England all-rounder over the long-on rope for a steepling straight six.
Flintoff, who made his successful return from knee surgery in a county match on June 11, bowled his four overs for 29. But he did at least come back well.
Once Allenby had gone, bottom edging into keeper into Cross's gloves as he tried to sweep spinner Stephen Parry, Flintoff returned to bowl his last two overs for just six runs.
Lancashire had won their previous six games before the 18-day mid-tournament break. But the addition of Flintoff and fellow Test star VVS Laxman did not provide its expected advantage.
Flintoff hit just one four before holing out off his fifth ball, one of four victims for O'Brien in his first spell.
And Laxman made just 18 as Lancashire never quite recovered from being reduced to 58-4.
Steven Croft top scored with 40 and Mark Chilton hit 34 as Lancashire fell short, their challenge finally ending off the penultimate ball.