BMC Racing team-mate and overall contendor, Tejay van Garderen, was positioned further ahead when the split happened. Faced with the choice of bridging the gap or allowing his team-mate to gain more time on key rivals in the general classification, Dennis chose the latter option.
As strong winds and rain continued to divide the peloton Dennis slipped out of the lead and finished the stage 1min 26sec behind winner Andre Greipel (Lotto Soudal). Fabian Cancellara (Trek) finished in third and now wears the yellow jersey owing to a time bonus.
Van Garderen finished 11th and moved up to eighth overall, 44 seconds off the lead. He and five others from the BMC Racing team were part of a decisive split of 26 riders that happened with less than 60 kilometres to go in the 166km race.
"At the time, we were just focused on the wheels in front of us," van Garderen said. "We weren't really paying attention to who was behind. We just wanted to stay safe and in the front. It just so happened that a lot of leaders were caught out. That's good news for us."
Among those missing the move was Tour de France champion Vincenzo Nibali (Astana Pro Team), last year's third-place finisher, Thibaut Pinot (FDJ), last year's Giro d'Italia winner, Nairo Quintana (Movistar Team), and BMC Racing Team's Dennis.
Working for van Garderen in the leading group, Daniel Oss, Manuel Quinziato, Michael Schär, Greg Van Avermaet and Swiss national road champion Danilo Wyss helped drive the pace. The gap rose from an initial 30 seconds, to 1 minute with 16km to go, to 1min 28sec by the finish.
"It was a tough call to make out there with our yellow jersey (Dennis) behind," van Garderen said. "For a while, we were thinking, 'Oh, don't work, let them catch up.' But then all the other GC guys would have caught up. So it was a tough call."
Dennis, the winner of Saturday's opening stage time trial, said he saw the decisive split unfold right in front of him.
"We were going through a lot of roundabouts and I was sort of toward the back, thinking it was safe because it wasn't too hard," he said. "Then Pinot let the gap go. He swung out and basically looked at me, saying I had to close it. I looked around and saw Nibali was there as well. So I made the call not to chase because if Nibali loses time, it is better."
Dennis said the reality of losing his grip on the leader's yellow jersey after a single day sunk in while riding with the second group the last 40 kilometres.
"It was a bit hard to swallow, but I came to terms with it," he said. "I could have closed the gap and taken Nibali with me, which more than likely would have meant I would have kept the jersey. But by sitting up, Nibali lost time, which makes it better for Tejay, who is our goal for the Tour."
BMC Racing Team sport director Yvon Ledanois said it would have been a bonus to keep Dennis in the lead, but the team's primary objective remains unchanged.
"This morning, we wanted to try to keep the jersey," he said, "but our number one priority is Tejay for the GC. The last 30 or 40 kilometres, we were all in for him because if he takes time on the other leaders, it is all the better. We knew today would be a crazy, windy and dangerous day. It was a hard day. But it is the Tour de France. Every day is like a classic. It was a hard day, but a good day for the team."