Camelot failed in his bid to become the first Triple Crown winner since Nijinsky in 1970 as Encke claimed the Ladbrokes St Leger at Doncaster.
Aidan O'Brien's colt raced towards the rear through the early stages, but made smooth progress at the half-mile pole and all seemed to be going well as he was eased out to make his challenge by Joseph O'Brien two furlongs from home.
But Mickael Barzalona appeared to steal a slight march on Mahmood Al Zarooni's 25-1 chance Encke, who went clear, and though Camelot (2-5 favourite) gave chase he never looked like he would get there, finishing three-quarters of a length in arrears. Michelangelo was third, a further three lengths away.
O'Brien snr said: "It wasn't what we thought it was going to be. It was a steadily run race and Joseph said he was a little bit fresh with him, but that was probably always going to happen in a slowly run race.
"You have to take your time on him over a mile and six, which he did, and when he got out he just stayed on rather than quickened. The Camelot we would have known over a mile, mile and a quarter and a mile and half would have quickened up. Today he just kept going and going.
"He ran a great race, but just got beat. It's disappointing for everybody, but that's the way it is. That's racing. We expected him to win and if I thought they were going to go that steady I would have had a pacemaker in, or two pacemakers. But that's my fault. I was sure they were going to go a pace.
"I'm not sure if he'll run again this year. If I thought there was a chance he was going to stay in training next season he might not run. But I don't know. It will be the boys' (owners Coolmore) decision."
Godolphin racing manager Simon Crisford heaped praise on Barzalona as Sheikh Mohammed's operation won the St Leger for the sixth time.
He said: "It's absolutely fantastic. This is a robust horse and we put a line through his run at York (defeat in the Great Voltigeur). The pace was so slow that day and it was a falsely run race. Mahmood had been very happy with his work in the build-up and Sheikh Mohammed gave the green light to run him.
"Mickael rode a beautiful race and when he kicked at the two pole he put the race to bed really. What we loved about that race was the turn of foot he showed, that stands very well for next season and he will stay in training. I would imagine it's very unlikely (that he will run again this season)."