New Zealand had not won any of their previous matches at three Confederations Cups dating back to 1999 but they had the better of the first half and went in 1-0 up thanks to a nice goal from Chris Wood.
However, Mexico came out reorganised for the second half and Raul Jimenez got an equaliser nine minutes into the second period.
Javier Aquino dribbled in from the left and after an exchange of passes on the edge of the New Zealand box, Jimenez spun to fire high into the net.
Mexico took control of the game and Oribe Peralta grabbed the winner from close range after 72 minutes when he swept home another incisive cross from man of the match Aquino.
Both teams had chances to add to their totals in what was a pulsating second period.
Juergen Damm missed at least two golden opportunities for Mexico to extend their lead, while at the other end Ryan Thomas was unlucky to see a lovely curling shot rebound off the bar.
Tommy Smith saved a Jimenez shot off the line two minutes from time.
"There wasn't a lot in it tonight, it was very close," New Zealand coach Anthony Hudson said.
"If we had been more clinical in front of goal we’d have a point. Overall I am really proud and I am really disappointed, our players deserved more."
Mexico ended the day as Group A leaders with four points, ahead of Portugal on goal average. Hosts Russia are in third with three points and New Zealand have none.
Mexico play Russia and Portugal face New Zealand on Saturday.
(Reporting by Andrew Downie, editing by Ed Osmond)
