Luis Suárez took the lead for Uruguay with an excellent header in the 39th minute.
England equalised in the 75th minute with a tap-in from Wayne Rooney – his first World Cup goal.
But Suárez sealed the deal for Uruguay with his second goal of the match in the 85th minute.
In order for England to remain in the competition, Italy needs to win both their remaining matches against Costa Rica and Uruguay – and England needs a win against Costa Rica.