TORONTO -- It completely and utterly fell apart for Eric Gagne on the mound at Rogers Centre on Tuesday night, just as the Red Sox were trying to ease the right-hander back into the role of key setup man in front of Jonathan Papelbon.

Entrusted with a one-run lead to start the bottom of the eighth, Gagne retired the first two batters of the inning before losing his control entirely and giving up three runs. It was a tough way for the Red Sox to go down, spoiling a solid effort from Jon Lester in what would wind up a 4-3 loss to the Blue Jays.

After the game, the stand-up Gagne stood in front of his locker searching for the words to describe how it all got away so quickly.

"I don't know how to put it into words, just very frustrating," said Gagne. "I ... just didn't throw strikes. You don't get people out if you don't throw strikes."

The loss -- combined with another win by the red-hot Yankees -- dropped Boston's lead in the American League East to a mere 2 1/2 games over New York. The last time the Red Sox had a lead that small was April 25.

"I don't think anybody is thinking about that right now," said Red Sox second baseman Dustin Pedroia. "We just have to play better than we have been. That's about it."

The Sox have a seven-game lead over the Tigers, who are second behind the Yankees in the AL Wild Card race.

It is key for the Red Sox to get Gagne going. He was acquired from the Rangers on July 31 to be a key part of the bullpen, and that has yet to happen. Gagne struggled after joining the club, then after finally straightening things out mechanically, he had tenderness in his shoulder that kept him off the mound between Aug. 27-Sept. 10.

Once he returned, Red Sox manager Terry Francona had gradually been getting him back into the mix, and in this one, he was given the responsibility of helping to set the table for Papelbon in the ninth.

It didn't happen. Helping Gagne rediscover his groove is critical for the Red Sox if they want to achieve their ultimate goal.

"He has to know from all of us that we need him," said Red Sox catcher Jason Varitek. "People can get down, but everyone makes mistakes. He's got good stuff. He can pitch and he's going to help us. We need him to help us."

With two outs and nobody on, Gagne gave up a walk to Frank Thomas, a single to Aaron Hill and back-to-back walks to Matt Stairs and Gregg Zaun, the latter of which drove in the tying run. Russ Adams bashed a two-run double to snap the tie.

"He pitched Frank carefully because of what he can do," Francona said. "It seemed like from there, everything looked like he wanted to throw it through the backstop instead of remembering what makes him Gagne. Again, I think he got a little revved up and [pitching coach John Farrell] tried to go out and slow him down. It didn't end up very well."

Did Francona ever consider going to Papelbon once the situation began getting sticky for Gagne?

"We wanted Gagne to get out of it," Francona said. "Two quick outs, that's his inning to get out of."

And Francona also admitted to making a calculated gamble, when you consider the upside that would have come from Gagne getting out of the mess.

"[It would have been] huge," said Francona. "There's a lot of reasons to keep him out there and pitch and have success. When it doesn't work, it hurts. It hurts all of us. I think it's the right thing to do. It doesn't make it easier."

Gagne, with the wound still fresh, didn't have the answers.

"A little bit of everything I guess, I don't know," Gagne said. "I have to go out there and stop thinking. It's frustrating. I don't know what to tell you. I walked people and that's it."

The Red Sox had taken a 2-1 lead on a two-out RBI double by David Ortiz in the top of the fifth. Between Manny Ramirez and Kevin Youkilis, the Red Sox again had 167 RBIs idling on the bench in this one. Coco Crisp, another mainstay, was out of the lineup as he tried to get a handle on the back woes that have troubled him lately.

But the Red Sox did just enough against A.J. Burnett, and Lester (6 2/3 innings, three hits, one run, five strikeouts) had put his team in position to win.

"We were able to manufacture a few runs today against a guy who had lights-out stuff," said Varitek.

After Gagne's mishap, Julio Lugo got the Red Sox a run closer by hitting a two-out solo shot to left against Burnett (8 2/3 innings, nine hits, three runs, 11 strikeouts) in the top of the ninth. But Scott Downs came on to get the final out.

By the end of the night, the Red Sox obviously had their thoughts on Gagne, and how to help him get over what he is going through.

Sox utility infielder Alex Cora was with Gagne when he was at the height of his career with the Dodgers.

"He's new to failure," said Cora. "You have to remember that."

The Red Sox remain confident that such struggle is only a temporary condition.

"We need him these last two weeks to be able to get ourselves where we want to be," Varitek said. "Fact of the matter is, we need him."