Michael Bradley hit a header in the ninth minute to score for the U.S. Thirteen minutes later, Landon Donovan scored another. But that would be the end of it as Mexico scored four consecutive goals to pull away with the victory.
An estimated 93,420 people were present at the sold-out game at the Rose Bowl.
This is Mexico's sixth Gold Cup title.
An overwhelmingly "viva Mexico" crowd assembled early for pre-game festivities - barbecuing, rallying and clad in green, white and red - prior to the 6 p.m. kickoff.
The U.S. players said they are used to large numbers of Mexico boosters booing them whenever the two teams meet.
One player said the vocal Mexicans merely gave the "yankees" incentive to play harder.
Pasadena police promised a strong and highly-visible presence at the game. At least 26 people were arrested, primarily for being drunk in public.
The every-four-years soccer series between North American, Central American and Caribbean countries determines the men's regional champion.
City News Service contributed to this report.