Lee Cook and Dean Cox were on target as Leyton Orient halted Walsall's climb to the League One play-off zone.
Cook latched onto Kevin Lisbie's header before smashing a left-footed drive past home goalkeeper Karl Darlow.
Cox then hammered the second from the halfway line over Darlow, who was off his line, for a 2-0 lead at the break.
Will Grigg's penalty made it 2-1 after Gary Sawyer's foul on Ben Purkiss and Walsall nearly snatched a point, but Andy Butler hit the post.
After winning four of their previous five matches, the defeat drops Walsall down to ninth in League One, while the O's move up to 12th.
VIEW FROM THE DRESSING ROOM
Walsall manager Dean Smith told BBC WM:
"I said to the lads at half-time 'Who's going to be my Ian Poulter'? Go and be Europe v the USA. And they very nearly did it.
"I've just seen a video of the penalty we should have had, which could and should have made it 2-2, one's blocked, one hits the post and their keeper's made a couple of good saves.
"But I'll accept defeats playing like that. And I think the supporters will too. They applauded us off at the end as they could see what we trying to do.
"We totally bossed the game. The only thing missing was the goals. They scored with their first attack and their second one was from the halfway line. "