Rafa Benitez's side were beaten 3-1 on the anniversary of Rafa Benitez's arrival at St James's Park.
Newcastle had led the Championship by five points after last weekend's win over Huddersfield Town at the John Smith's Stadium.
But that advantage has now gone, and United now only lead the division by goal difference with nine games left to play.
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Crucially, Huddersfield, 1-0 winners at Brentford, are now only six points behind them and David Wagner's side have a game in hand.
Tom Cairney, a player United looked at last summer, put Fulham into the lead in the 15th minute with a 20-yard shot.
Scott Malone found Cairney from the left, and the midfielder was allowed to pick his spot by Newcastle's defence, who stood off him.
Chances were few and far between for United before the break, though Ciaran Clark had a header tipped over by visiting goalkeeper David Button.
Jonjo Shelvey also got a warning from referee James Linington after an ill-disciplined half.
It got worse for Newcastle after the interval.
Ryan Sessegnon scored the first of his two goals in the 51st minute after United gave the ball away in their own area.
Sessegnon scored Fulham's third goal in the 59th minute after a quick break forward.
Daryl Murphy, sent on by Benitez in the wake of Sessegnon's second goal, briefly gave Newcastle hope with a strike into the bottom left-hand corner in the 76th minute.
But United's brief rally came to nothing, and Fulham had a late penalty after Paul Dummett tangled with Sessegnon in the box.
Tim Ream put the spot kick wide of Karl Darlow's goal.
And there were still boos at the final whistle from some disgruntled fans.
NEWCASTLE UNITED: Darlow; Anita, Lascelles, Clark (Gamez, 64), Dummett; Shelvey, Colback; Ritchie, Diame (Murphy, 61), Atsu; Gayle (Gouffran, 75). Subs not used: Elliot, Hanley, Perez, Mitrovic.
FULHAM: Button, Malone, Odoi, McDonald, Kebano (Fredericks, 84), Cairney, Ream, Johansen (Parker, 90), Aluko (Cyriac, 88), Kalas, Sessegnon. Subs not used: Bettinelli, Madl, Sigurdsson. Martin.
Goals: Cairney 15, Sessegnon 51, 59, Murphy 76
Bookings: Atsu 50, Clark 60, McDonald 73, Shelvey 79
Referee: James Linginton (Newport)