Peter Weatherson opened the scoring for the hosts ten minutes from the break and Annan grabbed a second on the hour mark through Smart Osadolor.
Bobby Linn pulled a goal back before Greg Rutherford headed an equaliser.
Annan manager Jim Chapman said: “We were in a winning position. However, we never kept our shape and gave Arbroath too much space to play in. We have been closing games out really well in recent weeks but it did not happen in this one. The players have worked hard to get us into top position so it was disappointing that there was a few boos and jeers at the end.”
Arbroath manager Todd Lumsden said: “You would normally be happy to come back from two goals down away from home to the league leaders. However, I am not. We should have had the game won as opposed to being 2-0 down. We were making chances and missing them at an alarming rate and it is points dropped as far as I am concerned.”
New Berwick boss John Coughlin found out how hard his job is going to be at Shielfield as a David Gormley-inspired Clyde sent the Borderers to the foot of the table with a 5-0 win.
Gormley, pictured, thumped home the only goal of the first half from 18 yards and he made it 2-0 five minutes after the break.
Scott Linton headed a third goal on 58 minutes before scoring twice in the final eight minutes.
Elgin City won at home for the sixth time this season when they saw off East Fife 4-2. Brian Cameron slotted the Borough Briggs men in front after 35 seconds and Craig Gunn tapped in a second with four minutes played. The Fifers rallied and were level by half-time thanks to goals by Kyle Wilkie and Nathan Austin, but Elgin won the spoils after the break when Darryl McHardy headed in and Daniel Moore netted a free-kick.
Queen’s Park beat Stirling 1-0 thanks to a second-half goal from substitute John Carter, with East Stirling moving up the league following a 3-1 success over Montrose.