Fighting in his hometown in front of a crowd upwards of 50,000, 29-year-old former schoolteacher Horn showed no signs of being overawed in the biggest test of his career and made a mockery of his huge underdog tag as he more than matched his Filipino foe.
Pacquiao, one of the finest fighters of his generation after world title wins in eight weight classes, finished the stronger of the two and seemed [to some] to have done enough to retain his 147lbs world title.
But two judges scored the fight 115-113 and the third had it 117-111 in favour of Horn as 38-year-old Pacquiao succumbed to the seventh defeat of an illustrious 68-fight professional career.
Pacquiao has now lost four of his nine fights and this latest setback could signal the end of his career, with trainer Freddie Roach saying in the build-up he would encourage his charge to retire if he was beaten by Horn.
The veteran had bounced back from his defeat to Floyd Mayweather in 2015 by overcoming Tim Bradley in their rubber match and comfortably beating Jessie Vargas to become a world champion once more.
He was expected to overcome the unheralded Horn in an effort to entice Mayweather into a rematch of their super-fight, but the unbeaten Australian rose to the occasion in what was only his 18th fight in the paid ranks.
A 2012 Olympian, Horn’s best win had come against faded former world titlist Randall Bailey and it was widely believed facing Pacquiao would prove too much of a step up.
It was a notion Horn, who worked as a substitute teacher in the early stages of his professional career, was keen to disprove as he showed his aggression early on.
Pacquiao opened up a cut over Horn’s left eye in the third round but the Filipino was left bloodied himself following accidental clashes of heads in the sixth and seventh rounds.
Horn troubled the overwhelming favourite over the middle part of the fight but Pacquiao was beginning to warm to his task in the eighth and a ferocious assault in the ninth seriously wobbled his opponent.
Having somehow stayed on his feet, Horn kept pouring forwards but it was Pacquiao who was on top over the closing stages of a scrappy contest, only for the judges to side with the challenger.