Wolfsburg's slim title hopes were dealt a severe blow at the SGL Arena as Dominik Kohr scored the only goal of the game to hand Augsburg a 1-0 victory.
It was Wolfsburg who dominated for long spells of the first half, but opportunities were difficult to come by against an Augsburg side that had failed to win any of their previous four Bundesliga games.
Augsburg came close to breaking the deadlock late in a nervy opening 45 minutes when Tobias Werner found space at the back post to send a header wide.
The in-form Bas Dost had been kept quiet by the Augsburg defence, but he tested Marwin Hitz early in the second half with a header which needed pushing past the post.
Augsburg were handed the opportunity to take the lead when Naldo foolishly brought down Baba Rahman, who had forced his way into the box with a powerful run.
Diego Benaglio responded impressively to save the penalty which followed from Werner, but Kohr reacted quickest to fire home the rebound.
Wolfsburg were denied an equaliser late on when Robin Knoche was adjudged to have fouled Markus Feulner in the box before heading home from close range.
The visitors were furious with the decision, and Dieter Hecking's side were unable to create another clear opportunity as they fell 11 points behind leaders Bayern Munich.
