Despite dominating for much of the game, Hibs failed to take any points from Kirkcaldy after Lewis Vaughan’s 84th- minute winner sealed victory for the hosts.
Following a goalless first half, Raith went ahead against the run of play on 53 when Jason Thomson clipped the ball into the path of Mark Stewart who vollyed home from 12 yards.
However, back came Hibs and after David Gray had missed from six yards, Fraser Fyvie levelled matters in the 56th- minute, firing home from close range as he latched onto a rebound after Scott Allan’s initial shot had been blocked.
But instead of going on to collect three points, Hibs were powerless to prevent Rovers from taking the lead for a second time as Vaughan scrambled the ball over the line following Christian Nade’s assist.
In a pulsating end to the game, both sides had chances to score again, leaving Hibs to feel particularly aggrieved at failing to make the most of their opportunities.
Twice during a goalless first half they struck the woodwork with defender Gray going close on two occasions early in the game.
First, he lashed a shot against a post before heading narrowly wide from close range.
And, as the visitors continued to control matters, Dominique Malonga headed against the bar on 29.
Midfielder Samuel Stanton also tried his luck before the break but his efforts all came to nothing as Raith, somehow, reached half-time on level terms.
The win takes the team from Fife to within five points of fourth-placed Queen of the South, while Hibs – who have now suffered back-to-back defeats – remain second in the table but only on goal difference from Rangers, who have played one game less.