It was an agonising moment for the 30-year-old, who had been tantalisingly close to becoming the first Briton ever to win a World Cup race.
The opening win of the season instead went to the experienced Neureuther, who celebrated his first victory since his daughter Matilda was born by promising to name his reindeer -- the traditional winner's prize in Levi -- after her.
"I never thought that I could win here. I'm 33, it's my first race as a father so winning here is unreal," Neureuther, who clocked a combined 1 minute 42.83 seconds for his two runs (50.43 seconds and 52.40), told Eurosport.
"It means a lot to me. You had to push really hard, you had to take your chances and still ski smart and it worked out perfectly."
The German, who was winning his 13th World Cup race but his first for nearly two years after overcoming back problems, was 0.37 seconds faster than Norway's Henrik Kristoffersen (1:43.20) with Sweden's Mattias Hargin third on 1:43.28.
Yet Neureuther admitted that he had been "lucky" that Ryding had erred. "He was extremely fast," he conceded.
Ryding had equalled Britain's best-ever World Cup result in January when he was second in the slalom at Kitzbuhel and had looked on course to go one better after clocking the fastest opening run of 50.29.
"It is a shame not to come away with some points, but sometimes slalom can be cruel," Ryding told reporters.
"Going into the second run I knew it was tight and I had to attack. I started the pitch the way I know I can, but halfway down my inside ski just went away from me and that was it."
Austria's Marcel Hirscher made a surprisingly early return just three months after breaking his left ankle in training and, while clearly feeling his way back, the six-time overall World Cup champion reckoned he was pleased with his 17th place finish.
(Reporting by Ian Chadband; Editing by Toby Davis and Pritha Sarkar)
