With five wins and two draws to start the season, high-flying NYCFC had the chance to restore their four-point lead atop the standings in the East.
But the visitors came unstuck in Portland, where the counterattacking Timbers reigned supreme thanks to Sebastian Blanco, Fanendo Adi and Larrys Mabiala on Sunday.
NYCFC controlled possession and completed almost 800 passes but Patrick Vieira's men were caught out by the Timbers, who opened the scoring via Blanco's looping header approaching the half-hour mark.
The Timbers doubled their lead in the 38th minute when Adi tapped in following a swift counterattack before Mabiala's header completed the scoring with 24 minutes remaining at Providence Park.
NYCFC's defeat left them only a point above Atlanta United, while Portland moved within two points of the top six in the Western Conference.
Gustav Svensson, Will Bruin and Jordy Delem ensured the Sounders snapped their winless start.