There was more cup heartbreak for the Reds as Cornish Pirates snatched victory with a try just five minutes from time.
The visitors had never led in the knock-out tie until they worked the ball wide from a scrum and replacement Dan Koster dived over in the airport corner.
It was the fourth straight season that the Reds had exited the cup stage by a tiny margin - the British & Irish Cup semi-finals against Yorkshire Carnegie and Leinster 'A', and the defeat in the B&I final to Munster 'A'.
The visitors had a few early thrusts and Kyle Moyle lost his footing when one-on-one with Reds' full-back Brett Herron inside the Jersey 22, but the home side then began to build a platform in their opponents' territory. Herron set the stage with a fine touch-finder, and then his long flat pass found Leroy Van Dam with the space to finish in the corner, and former Pirate Aaron Penberthy added the extras.
The Pirates had their chances and saw a try by replacement Alex Cant chalked off for a forward pass after a good run by hooker Sam Matavesi; the Reds became the dominant force during what remained of the half, but couldn't add to their points tally in spite of multiple opportunities, including several penalties and a claim for a try that was ruled to have been held up. In the end the Pirates cleared their lines and narrowed the arrears with the final kick of the half, Javier Rojas Alvarez slotting a straightforward penalty.
The error count from both sides was high on a bright but raw day that saw a northerly wind ripping across from the airport runway. The second half was scoreless until Penberthy slotted a penalty just before the hour. This provoked a reaction from the visitors, who won a penalty near half-way for a high tackle and then produced a spell of pressure that culminated in number 8 Toby Freeman piling over from close range by the posts, with Rojas Alvarez tying the scores with his conversion.
Extra-time and a kicking competition were both possibilities, but both sides tried to win it in normal time. Moyle missed a long-range penalty effort, but Penberthy then struck an imperious effort from just inside the Pirates' half and the Reds were back in front with 10 minutes to play.
Stirring themselves for one last burst in attack, the visitors came close when Rojas Alvarez jinked through but could only find a Jersey defender with his popped pass. From the resultant scrum, the Reds opted to try and run the ball from behind their line rather than risk a charge-down, but were penalised for a forward pass. From the resulting five-metre scrum the Pirates struck and worked the ball wide for Koster to dive over spectacularly in the corner just eight minutes after coming on as a replacement. The conversion from Rojas Alvarez put his side four points clear, and the Reds couldn't find a winning score with the last play, although in a breathtaking finish an opportunity from an attacking lineout coulddn't be taken, and a 30-metre rampage from Janco Venter in the last play was only stopped five metres short.
"It's a hugely disappointing result for us," said Reds' assistant coach Neil Tunnah. "We had opportunities throughout to score the points to win the match, but we weren't clinical enough to take them, and Pirates came back to bite us."
The visitors were ecstatic with a win that broke a sequence of six straight defeats at Jersey hands, with Pirates' last win coming at the Mennaye Field (by 16-10) in December 2015. It was also a welcome away win during a season in which they had only won twice outside Cornwall - both times at Hartpury.
"It was a massive victory for us, as much mentally because of our record against Jersey and also because we've lost a number of really tight away games this season," said Co-coach Alan Paver.
"It could have gone either way, and it wasn't pretty, but we managed to stay in the fight and we want to go all the way in this competition."
The Reds will now focus on a strong finish to their Greene King IPA Championship season, starting with next Saturday's home game against London Scottish (k-o 2pm). Tickets are available via the Eventbrite site, with the price for adult non-members pegged at £15 until 2pm on Thursday.
JERSEY REDS: Herron; Stapley, Newey, Best, Van Dam; Penberthy, Homer; Godfrey (Morley 52), Maddison (Selway 48), Atalifo (Rodman 59), Sexton (c), McKern (Beckett 64), Bartle, Argyle, Venter. Not used: Hatherell, Mudariki, Eastwell
CORNISH PIRATES: Moyle; O'Meara (Cant 8), Parata, Patterson, Wedlake (Koster 67); Rojas Alvarez, Day (Schwarz 60); Walker, Matavesi, Concu (Judge 10), Cutmore, Beukeboom (c), Lee, Bolwell, Freeman. Not used: Frost, Clemson, McRae
REFEREE: Christophe Ridley. Assistants: Rob Warburton, Phil Watters
Half Time: 7-3
Man-of-the-match: Javier Rojas Alvarez (Cornish Pirates)
Try: Van Dam 10
Conversion: Penberthy 10
Penalties: Penberthy 57, 69
Tries: Freeman 63, Koster 75
Conversions: Alvarez 63, 75
Penalty: Alvarez 40
Why not get yourself a Hot Pot (Curry or Chilli served with rice) in the supporters marquee £8 per pot.