Andres Ambuhl scored the winning goal in the third period Sunday after Canadian goaltender Justin Pogge misplayed the puck to give HC Davos a 3-2 victory.
"It was an unfortunate goal to win it but sometimes that happens," said Canadian forward Tyler Wright. "Pogs went out to play the puck the way he's probably done a thousand times. For some unknown reason, it gets misplayed.
"You hate to lose like that, but it's a game of breaks and mistakes. They got a lucky one."
It's the second straight year Canada has lost in the final of the five-team tournament. Metallurg Magnitogorsk beat them 8-3 in the championship game last year.
Mario Scalzo and Jason Doig had staked the Canadians out to an early 2-0 lead Sunday in front of another noisy sellout crowd at Eisstadion Davos.
But the Canadians were too "cautious," according to coach Pat Quinn, and saw the home team chip away at that first-period lead.
"They looked dead in the water early on and if we'd been able to get the third goal it would have been a smoke out," said Quinn. "But we didn't get it."
Robin Leblanc, Eero Somervuori and Ambuhl scored for Davos, which won its home tournament for the fourth time since 2000.
Canada led 2-1 heading into the third period before Somervuori tied it on a power play just over three minutes in. Six minutes after that, Ambuhl scored the eventual winner.
Despite the disappointing result, Quinn left his first Spengler Cup feeling extremely proud of the Canadian team, which was made up of AHL players and European-based professionals.
"There's no explaining the disappointment that everybody feels," he said. "These kids really worked well and came together as a group from all over the place.
"Typical of Canadian guys, they worked hard and they were honest in their performance. At the end of the day, I'm very proud of how they performed."
Canada has won the Spengler Cup 10 times since it started participating in the annual tournament in 1984.
However, it's struggled to find that same success in recent years. The last time a Canadian team won the event was in 2003.
Captain Stacy Roest, who has been a member of the past four Spengler squads, chalks it up to how short the tournament is.
"It's five games in six nights," he said. "It's a grinding, gruelling tournament but it's a lot of fun. We just came up a little bit short again."
Canada faced more than its share of adversity during this event.
It went down early in round-robin games against Mora IK and Davos before rallying for victories. After a 5-0 loss to Russian team Khimik, the Canadians overcame the questionable ejection of Pogge to beat Berlin on Saturday and earn a spot in the final.
The players did everything Quinn expected of them.
"We came together very well," said the veteran coach. "I really liked this group and I'm sorry we didn't win.
"But at the same time, I'm very proud of how they played."
A Canada-Davos final at this event is what all the fans hope for and it showed in the fact that many were already in their seats two hours before the noon start.
The poised Canadians handled the "wild atmosphere" created by the Davos fans and put in the kind of performance they think was good enough to win the championship.
"We played well tonight," said Wright. "But when we made our mistakes they capitalized on them.
"I thought we controlled the majority of the play and could have won this game."