It is the first time the Kiwis have ever lost to Tonga and the defectors form the Kiwis team got the last laugh, with an historic win.
But it wasn't Jason Taumalolo who was the big difference, rather David Fusitu'a who scored three tries as Tonga went on a rampant second half run.
New Zealand will now play Fiji in Wellington next week and if they win that are on target to play Australia in the semifinals in Brisbane.
Tonga will play Lebanon and then likely face England in Auckland.
But it really shouldn't have turned out like this. The Kiwis should have had the game sown up at half-time when leading 16-2, but 17 minutes of madness cost them dearly.
It was the biggest challenge for David Kidwell in his coaching career and for the first half he looked to have he masterminded an outstanding game plan, where they were able to soak up the Tongan pressure up the middle of the field, rush the Tongan halves and strike out wide themselves.
But in the second half the Kiwis went to pieces. They lost their structure, mistakes came and they struggled to to halt a Tongan team on a roll.
In front of an already highly charged crowd of 25,000, the intensity increased when Tonga provocatively advanced on the New Zealand haka, with Andrew Fifita getting right in the face of Nelson Asofa-Solomona.
So yes, this game was going to be physical and emotional.
There was a huge roar when Jason Taumalolo made his first run, it was a slow, grinding sort of charge where he made 5m before three Kiwis dragged him down.
Tonga got the scoring underway, with Sio Siua Taukeiaho kicking a penalty.
With the Kiwis, it was their outside backs that impressed first, with Dallin Watene-Zelezniak and Roger Tuivasa-Sheck both making nice runs.
But it was Jordan Rapana who came closest to scoring the opening try, he had space in front of him to score in the right corner, but the pass from centre Brad Takairangi wasn't straight to him and the Tongan defence was able to scramble.
At the midway point of the half, the Kiwis were on the board with Watene-Zelezniak scoring a try down the left edge, getting a well-timed ball from Dean Whare that created the opening.
With 12 minutes left in the half, Rapana finished off a delightful try from the Kiwis, as the ball was moved along the line and the Raiders winger getting a nice no-look pass from Takairangi to set him up.
In the 34th minute Tupou thought he'd scored for Tonga, but it was ruled out for a forward pass in the buildup.
The Kiwis landed what looked like a damaging blow just before the break when Takairangi offloaded the ball while falling to the ground, to Tuivasa-Sheck and he ran through a big gap to score.
Eight minutes into the second half Tonga finally got a try, it came from a cross-field bomb from Tuimoala Lolohea, that Fusitu'a jumped up for then swivelled round in the air to ground the ball.
Fusitu'a got his second try in the 60th minute, taking an inside pass from Hurrell and running through some ordinary defence to get to the line.
Tonga hit the front almost straight afterwards when Lolohea intercepted a casual pass and ran 20m to go under the posts.
Will Hopoate got Tonga's fourth try in 17 minutes as once again the Kiwis' defence opened up.
The Kiwis were now down by eight points and desperately needed to regain their composure. They got that when Tuivasa-Sheck scored one of the tries of the tournament, as even though he had four players on an overlap out wide, he chose to dance through the Tongan defence for his second score of the day.
But any hope of a Kiwis comeback ended when Fusitu'a brought up his hat-trick with three minutes to go and consigning this to one of the darkest days in the history of New Zealand rugby league.
Tonga 28 (3 David Fusitu'a, Tuimoala Lolohea, Will Hopoate tries; 3 Sio Siua Taukeiaho, Tuimoala Lolohea goals). New Zealand 22 (Dallin Watene-Zelezniak, Jordan Rapana, 2 Roger Tuivasa-Sheck tries; 3 Shaun Johnson goals). HT: 16-2
Photo by: GETTY IMAGE (Caption: Hat-trick hero David Fusitu'a and defector was superb in the second half for Tonga)