Thompson led by three strokes with six holes left when informed of penalty, which was prompted when a TV viewer emailed over incorrect ball placement
Lexi Thompson received a four-stroke penalty with six holes to play in the final round of the first womens major of the year for making an incorrect ball placement one day earlier.
The extraordinary delayed penalty knocked the American golfer out of the lead at the ANA Inspiration tournament in Rancho Mirage, California.
After gathering her composure when her three-shot lead vanished, the 22-year-old rallied to card a closing five-under 67 and tie at 14-under 274 with South Koreas So Yeon Ryu, who had a 68. But Ryu triumphed with a birdie at the first extra hole.
Thompson was penalised after a television viewer apparently alerted officials that Thompson has marked her ball and then put it back in an improper place before a 1-foot putt on the 17th green in the third round on Saturday.
The LPGA did not decide on a penalty until Sunday, when Thompson had a three-stroke lead and appeared to be cruising to her second major championship.
The organisation confirmed the video review was prompted by an email from a television viewer in a statement issued on Sunday evening.
Thompson was penalised two strokes for an incorrect ball placement and two strokes for an incorrect scorecard.
Thompson reacted with disbelief when officials told her of the decision while she walked to the 13th tee.
Is this a joke? Thompson asked. After being assured it wasnt, she responded: This is ridiculous.
Thompson appeared to choke up slightly, but gathered herself and birdied the par-4 13th hole.
Inbee Park birdied the 16th hole moments later to create a five-person tie for the lead. Meanwhile, course officials laboriously changed every number next to Thompsons name on the scoreboard.
Thompson won this tournament in 2014, and she has excelled for four consecutive years at the LPGAs first major of the season.
Golf fans on the course and the internet erupted with outrage when the LPGAs decision became understood. Tiger Woods immediately came to Thompsons defence on Twitter.
Others joined Woods dismay at the stunning turn of events.